Recently, we visited Sanan Optoelectronics Co., Ltd. (Sanan Optoelectronics, 600703), and communicated and exchanged with the company's directors on the company's LED business and solar cell business.
Our research has learned that the LED chip and application business is the main source of revenue for Sanan Optoelectronics. Driven by the development of the industry, combined with the capacity expansion process (after its Wuhu project is put into production), according to the average unit price of about 3.5 points a chip, its annual sales of pure chips will exceed 5 billion yuan.
In addition, Sanan Optoelectronics is actively expanding its concentrating solar cell business. It plans to achieve a capacity of 100MW for concentrating photovoltaic solar systems in 2011, 500MW in 2013 and 1000MW in 2015. It is expected that large-scale industrialization will take 3-5 years. The time period, when the concentrating business will become its new performance growth point.
We expect Sanan Optoelectronics' three-year operating income for 2010-2012 to be 1.165 billion yuan, 3.264 billion yuan, and 5.633 billion yuan, and the basic earnings per share are 0.75 yuan, 1.40 yuan, and 1.57 yuan. In view of its future growth and profitability, the reasonable valuation range is 46-55 yuan, giving it a “recommended†investment rating.
On the evening of December 1, Sanan Optoelectronics issued a suspension notice, saying that it will sign a major agreement in the near future. In order to avoid abnormal stock price fluctuations, the stock will be suspended from December 2, 2010, and will be on December 7, 2010. Re-sign after the announcement of related matters. Before the suspension, its share price closed at 42.29, down slightly by 0.07%.
Profitability is increasing year by year
Since the completion of the asset reorganization of Sanan Optoelectronics in June 2008, Sanan Optoelectronics' revenue has grown rapidly. Currently, it is mainly engaged in the research and development of full-color ultra-high brightness LED epitaxial wafers, chips, compound solar cells, PIN photodetector chips, etc. Production and sales, product performance indicators are at the international advanced level.
It is understood that Sanan Optoelectronics' current revenue is mainly from the LED chip business, which is the leading enterprise in the domestic LED industry. In the first half of 2010, LED chip and application business revenue accounted for 96.3% of the company's total revenue.
In recent years, Sanan Optoelectronics' profitability has increased year by year. In 2009, its gross profit margin reached 42.01%, and its net profit margin reached 38.31%. In the first three quarters of 2010, its gross profit margin and net profit margin both exceeded 45%, reaching 45.92% and 45.47% respectively. From the perspective of single-quarter earnings, Sanan Optoelectronics' gross profit margin also showed a steady increase, while the net interest rate changed significantly due to additional income (financial subsidies). However, after deducting the financial subsidy income, its single-quarter net profit margin also appeared. Stable and improved situation.
Chip annual revenue will exceed 5 billion
From the overall situation of LED industry operation in 2010, the supply of chips is in short supply, and the market capacity is seriously insufficient, which has become an important factor restricting the rapid development of the LED industry. Affected by this and optimistic about the future market prospects, LED manufacturers have launched large-scale capacity expansion plans in chip production. And due to the sharp increase in demand for downstream applications, the LED industry will enter a period of explosive growth in the next few years, and the chip will still show a situation of short supply.
In response to the rapid growth of the market in the future, Sanan Optoelectronics has pre-empted the industry layout and expanded its production capacity to keep pace with the development of the industry. In 2009, it raised funds to invest in the Tianjin Sanan project and in 2010 raised funds to invest in the Wuhu project. At present, the Tianjin Sanan project has been officially put into production, and it is in a state of full production. The annual production capacity of the epitaxial wafer of the Tianjin project will reach 850,000 pieces, and the annual production capacity of the chip will reach 20 billion pieces.
At present, the construction of the Sanan Optoelectronics Wuhu project has been basically completed. MOCVD equipment is in the process of being in place. After commissioning in February and March, it is expected to start production at the end of the year. It is expected to be fully put into operation by the end of 2011.
After the Wuhu project is put into production, the annual production capacity of the epitaxial wafer will reach 5.3 million pieces, and the annual production capacity of the chip will reach 117 billion. By then, the total production capacity of Sanan Optoelectronics epitaxial wafers will exceed 6 million pieces, and the total chip production capacity will reach 155 billion. If the average unit price is about 3.5 points per chip, the annual sales revenue of chips will exceed 5 billion yuan.
Accelerate into downstream applications
Sanan Optoelectronics and Chery Automobile Co., Ltd. established a joint venture of RMB 80 million in Wuhu Economic and Technological Development Zone to establish “Wuhu Anrui Optoelectronics Co., Ltd.†(51% equity of Sanan Optoelectronics Co., Ltd.), which is mainly engaged in LED packaging, application and automotive lighting. Design, production, sales and service of various related parts and components in lamps and other application fields.
The joint venture company will establish a technology R&D center, which will help strengthen the strength of Sanan Optoelectronics' R&D technology in LED packaging and application. The establishment of the joint venture company, while extending the Sanan Optoelectronics LED industry chain, also strengthened the capacity of the downstream application market expansion of Sanan Optoelectronics, and has a good role in promoting product development.
New performance growth point
Sanan Optoelectronics and US EMCORE Corporation have established a joint venture of 30 million US dollars in Wuhu Economic and Technological Development Zone to establish "Sanke Photovoltaic Co., Ltd." (Sanan Optoelectronics holds 60% of the shares). The main business scope of the joint venture company is design, research and development, production and sales. Service and distribution of high-concentration solar energy applications (HCPV) components and systems for terrestrial solar applications.
At present, China has achieved an important position in solar energy manufacturing. In 2008, China's solar cell production capacity was about 3.3GW, and its output exceeded 2GW. In 2009, China's solar cell production reached 4.3GW, accounting for 40% of the global market. With the continuous development of solar cell technology, the third generation of concentrated solar power generation has been developed. As concentrating photovoltaics is still in its infancy, the global installed capacity of concentrating solar energy is still relatively small. EPRI (American Electric Power Research Institute) statistics show that the current global installed capacity is less than 200MW, and globally, concentrating solar energy is added every year from 2007 to 2009. The installed capacity is 2MW, 10MW and 2MW respectively.
The concentrating battery has the characteristics of large heat generation per unit area and high conversion efficiency. With the advancement of technology and the decline of construction cost, solar concentrating batteries will become another important development direction of solar power generation. CPV (concentrated photovoltaic) alliance is expected to be global new in 2010. The installed capacity of CPV will reach 150MW, and the newly installed capacity will reach 1.8GW in 2015.
Sanan Optoelectronics plans to achieve a capacity of 100MW for concentrating photovoltaic solar systems in 2011, 500MW in 2013 and 1000MW in 2015. The development speed of concentrating photovoltaics is closely related to the industrialization process and industrial policy promotion. It is expected that large-scale industrialization will still be needed. 3-5 years of time, when the spotlight business will become a new performance growth point of Sanan Optoelectronics.
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