Rating: Neutral (Avoid) | Target Price: RMB 5.8–7.0 (base-case fair value range) | Current Price: RMB 8.13 (close, 2026-10-23) | Margin of Safety: -28.7% (base-case fair value floor of RMB 5.8 vs current price, negative) | Time Horizon: 12 months | Report Date: 2026-10-26
Total market cap RMB 68.15 billion (8.383 billion shares); PS (TTM) 6.48x, PB 4.92x (80th percentile since IPO), EV/EBITDA (annualized 9M26) ~17.5x; TTM net profit attributable to parent RMB 558 million, PE (TTM) 122x — profitability has just turned positive, so PE is for reference only.
The operating inflection at SICAR is real: revenue has grown 20%+ for three consecutive years (FY2023 RMB 5.324 bn → FY2025 RMB 8.180 bn → 9M26 quarterly record of RMB 3.196 bn), gross margin has recovered from -6.81% in FY2023 to roughly 20% in the first three quarters of 2026 (29.55% in Q3 alone), 9M26 net profit attributable to parent of RMB 690 million marked the first turnaround to profit, and the SiC 8-inch line plus automotive-grade qualification constitute a scarce domestic position. But two constraints are equally clear. First, the quality of the turnaround awaits verification — of the RMB 690 million, related-party SICAR Advanced contributed RMB 256 million in H1 from technology licensing, and non-recurring gains (mainly asset disposals) added RMB 347 million; excluding the disclosed licensing, core recurring profit was only about RMB 87 million (mixed-caliber estimate, possibly lower in reality). Whether core earnings can take over after licensing income drops to zero in 2027 will only be revealed by the earnings preannouncement in January–February 2027. Second, the price has already run ahead — at RMB 8.13, the stock trades 16%–40% above the base-case fair value (RMB 5.8–7.0), and about 23% above the probability-weighted fair value of RMB 6.61 (implying an expected return of -18.7%); PS/PB carry premia of 93%/64% over the power-semiconductor peer median, and back-solving a steady-state 25–30x PE requires normalized attributable net profit of RMB 2.27–2.73 bn (4–5x TTM). The demand math (SiC penetration ramp + AI as a second growth curve) supports 25–30% top-line growth; the debate is not about revenue but about margin delivery and exit multiples. The inflection is real, but the odds are unfavorable: Neutral (Avoid); wait for the RMB 5.8–7.0 range or evidence of normalized gross margin.
This report's estimate: RMB 690m − 347m (non-recurring) − 256m (H1 licensing) ≈ RMB 87 million, only 12.6% of reported attributable profit. Note the caliber limitations: the RMB 256 million is the H1 figure disclosed in the semi-annual report; after the Q3 delivery, licensing revenue continued to be recognized but was not separately disclosed, so true 9M26 core recurring profit may be lower. On the other hand, Q3 quarterly non-recurring-adjusted profit was RMB 408 million with a net non-recurring amount of only RMB 30 million, suggesting the "handover" may have partially occurred in Q3 — though licensing revenue is still embedded, and pure foundry profitability awaits breakdown. In addition, 9M26 minority interest loss was -RMB 350 million (attributable profit of RMB 690m > consolidated net profit of RMB 340m); minority shareholders of consolidated subsidiaries (government funds/AIC) continued to absorb losses and injected RMB 617 million, so the economic substance on an attributable basis warrants a discount. If the January–February 2027 preannouncement shows core earnings falling short once licensing goes to zero, the "accelerated profit inflection" narrative will be falsified.
The quality of the three drivers must be assessed separately: the depreciation & amortization to revenue ratio fell from 47.7% in FY2025 to ~35% in the first three quarters of 2026 (estimated from the 9M26 cash flow statement), a mechanical outcome of revenue scaling that is sustainable; the industry price-hike cycle and the Company's Q3 price increases are cyclical tailwinds; but the 29.55% Q3 gross margin includes technology licensing revenue (high margin). H1 gross margin excluding the RMB 279 million licensing revenue was only ~7.0% (this report's estimate), and the Company does not disclose gross margin by segment — Q3 pure foundry gross margin could be in the 22%–27% range, or lower. Also note: the RMB 1.211 bn transaction removed fixed assets (RMB 16.84 bn → 15.55 bn) and construction in progress (RMB 2.43 bn → 1.11 bn) from the balance sheet, shifting part of the future depreciation burden to an associate in which the Company holds only 25.10% — the margin improvement partly reflects transaction structure. Verification point: Q4 quarterly gross margin (after the licensing effect fades) ≥25%.
The "first" contest must be presented in dual calibers: the Company claims "China's first 8-inch SiC MOSFET production line" (mass production from November 2025, starting at 2,000 wafers/month), while the Sanan–STMicro joint venture (Chongqing) 8-inch line came online on 2025-02-27 and, per Xinhua, is "China's first 8-inch automotive-grade SiC power chip line at scale" — the qualifiers differ (SiC MOSFET line vs automotive-grade scale production line) and should not be conflated. Penetration likewise has dual calibers: NE Times (China power-electronics installations) and Yole (global xEV) differ but point in the same direction. Based on Yole's estimate of ~USD 10.3 bn global SiC devices in 2030 and the Company's share rising from 5% to 5–8%, SiC revenue could reach RMB 3.6–5.8 bn by 2030; adding AI power (guidance of >10% of 2026 revenue, H1 growth of 84.31%) and the 12-inch analog platform, a 25–30% revenue CAGR is supportable. But Sanan-STMicro, Silan Micro, STMicroelectronics Catania, and Founder Micro are all converting to 8-inch collectively in 2026–28, leaving a cost-gap window of about two years; the AI second curve currently has only a technology matrix and growth data, with no quantified disclosure of order backlog.
Back-solving a steady-state 25–30x PE at the current price implies normalized attributable net profit of RMB 2.27–2.73 bn, or 4–5x TTM attributable profit of RMB 558 million; reverse DCF implies ~8.5% perpetual growth. The sell-side consensus target of RMB 11.6 implies a 2028 PS exit assumption of 6–7x, significantly above peers — the market has actively chosen a high multiple, and the "no margin of safety" judgment hinges on the exit-multiple anchor: this report's base case anchors Times Electric's normal-profit PE of 15.2x plus a scarcity growth premium (30–35x) and PS of 4–4.5x (between Silan Micro's 3.35 and China Resources Micro's 6.37), all independent of the Company's current price. EPV zero-growth value is ~RMB 0.35/share (normalized FCFF center ~RMB 900 million, WACC 9.5%, net debt RMB 6.524 bn), and book value per share of RMB 1.65 provides a floor reference — roughly 96% of the current price is a growth option, a typical shape for a foundry in early turnaround (a descriptive indicator, not standalone evidence of overvaluation); the valuation conclusion rests on the scenario table and peer anchors.
Bear-case path: if automotive annual price resets resume and pass through to foundry, pushing gross margin back below 20%, combined with licensing going to zero and RMB 300–600 million of annual impairments, there is a path for 2027–28 attributable net profit to fall back to RMB 0–300 million (implying fair value of RMB 2.8–3.5). A symmetric statement is required, however: the industry is currently in structural tightness, not a price-cutting channel (two rounds of price hikes by STMicro/Infineon, substrate price recovery, tightness in automotive/AI high-end); new capacity is largely IDM self-supply or JV-bound (Sanan-STMicro's 49% STMicro ownership serves captive use, Silan Micro's IDM is self-used), so direct pass-through to third-party foundry pricing may be limited; the Q3 quarterly non-recurring-adjusted profit of RMB 408 million was achieved while absorbing ~RMB 246 million of single-quarter impairments. This bear case is a price assumption requiring ongoing monitoring, currently assigned a ~25% probability.
| Metric (RMB 100mn / %) | FY2023 | FY2024 | FY2025 | 2026Q1–Q3 (latest) |
|---|---|---|---|---|
| Operating revenue | 53.24 | 65.09 (+22.3%) | 81.80 (+25.67%) | 77.58 (+43.09%) |
| Net profit attributable to parent | -19.58 | -9.62 (loss narrowed 50.9%) | -5.95 (loss narrowed 38.2%) | 6.90 (turnaround, +249.0%) |
| Non-recurring-adjusted attributable net profit | -22.62 | -14.10 (loss narrowed 37.6%) | -11.19 (loss narrowed 20.6%) | 3.43 (turnaround, +139.3%) |
| Core recurring ex-licensing (est.) | — | — | — | ~0.87 (mixed caliber) |
| Gross margin | -6.81% | 1.03% (unverified) | 5.51% | 19.65% (unverified; Q3 alone 29.55%) |
| Attributable net margin | -36.8% | -14.8% | -7.3% | 8.9% |
| Operating cash flow | 26.14 | 19.03 | 21.35 | 25.44 (+229.4%) |
| Free cash flow (OCF−CapEx) | -77.23 | -16.55 | -12.00 | -11.83 |
| Cash & cash-like (period-end) | — | — | 55.15 | 39.08 |
| Interest-bearing debt (period-end) | — | — | 106.58 | 104.32 |
| Debt-to-asset ratio | — | — | 44.69% | 44.32% |
| Net debt/EBITDA | — | — | 2.36x | 1.53x (annualized) |
| EBITDA | — | — | 21.78 | 32.07 (+116.4%) |
Reasons for metric changes (items with YoY ≥ ±20%, company caliber): ① Revenue +43.09% (Q3 alone +65.87%) — company attributes to "volume and price rising together, mix optimization, and favorable impact of technology licensing on revenue"; ② Gross margin +15.68pp — scale effects, lower D&A ratio to revenue, mix optimization, and licensing contribution; ③ Turnaround in attributable profit — includes H1 licensing contribution of RMB 256 million and asset disposal gains of RMB 325 million (RMB 1.211 bn related-party transaction delivered in Q3); ④ Cash down 65.7% from period start — 9M26 debt repayment of RMB 7.659 bn + capex of RMB 3.727 bn, partly converted into time-deposit certificates (debt investments of RMB 1.155 bn); ⑤ R&D expense -28.7% — reduced expensed R&D plus capitalization ratio rising to 20.46% (H1, unverified); ⑥ FY2025 accounts receivable +63.0% vs revenue +25.7% — "larger sales scale, customer mix adjustment"; 9M26 receivables growth has fallen back to +21.7%, slower than revenue; ⑦ Contract liabilities of RMB 542 million (+138.1% from period start) — a positive order/advance signal; ⑧ Inventory impairments normalized — RMB 979 million provided in FY2025, RMB 744 million in 9M26 (large provisions coexisting with reversals/write-offs).
Q3 quarterly revenue was RMB 3.196 bn (+65.87% YoY, +22.92% QoQ), quarterly attributable net profit RMB 412 million (+240.66%), quarterly non-recurring-adjusted profit RMB 408 million (+220.98% YoY, turned positive) — quarterly non-recurring-adjusted and attributable profit were nearly equal, so non-recurring impact was minimal for the quarter, though revenue still includes the licensing business. Execution precision was high: the 9-29 preannouncement (revenue ~RMB 7.766 bn, attributable profit ~RMB 681 million) versus actual Q3 results (RMB 7.758 bn / 690 million) showed deviations within 1.5%. Operating cash flow of RMB 2.544 bn (+229%) far exceeded attributable net profit (OCF/net profit of 3.69x, due to non-cash depreciation), and contract liabilities up 138% from period start indicates improving orders and advances. The benchmark for judging a "beat": sell-side FY2026 consensus attributable profit of ~RMB 420 million was a stale pre-Q3 figure (China Post Securities' February forecast was only RMB 60 million); consensus has been revised up since Q3 (+11.1% over the past 90 days) — versus the stale consensus this is a beat; versus the market's already-priced growth expectations, Q4 and 2027 will provide the test. On impairments, Q3 absorbed ~RMB 246 million of asset impairments (RMB 744 million cumulative in 9M26); the RMB 408 million non-recurring-adjusted profit is post-impairment, so its quality is better than it appears.
Business model: Asset-heavy specialty-process foundry + module packaging "one-stop system foundry" across three production lines: 8/12-inch silicon-based (power/BCD/MCU/MEMS/analog) and 6/8-inch SiC; revenue mainly from foundry services + packaging sales (together ~95%), non-subscription with no recurring contract revenue, pricing fluctuates with the semiconductor cycle and automakers' annual price-downs; currently no significant pricing power—gross margin relies on utilization, depreciation dilution, and product mix upgrading.
Cash content of earnings: OCF has been persistently positive and far above book profit (9M26 OCF RMB 2.544 bn vs. net profit attributable to parent RMB 0.690 bn, OCF/net income 3.69; FY2023-2025 OCF RMB 2.614/1.903/2.135 bn), indicating that losses are depreciation-driven rather than cash bleed—a typical profile of the foundry model. But FCF has been negative for four consecutive years (RMB -7.723/-1.655/-1.200/-1.183 bn), with capex swallowing all operating cash; FCF/net income for 9M26 is -1.71. Recurring earnings test: non-GAAP (recurring) net profit of RMB 343 mn differs from the RMB 690 mn attributable figure by 50%, and the recurring figure itself includes RMB 256 mn of licensing income—excluding it, core recurring profit is only about RMB 87 mn (mixed basis); the gap between attributable and core profit far exceeds the 15% warning threshold, so the quality of the "return to profitability" must be discounted. Another hidden channel: 9M26 other income (mainly government subsidies) was RMB 682 mn, roughly double total pre-tax profit of RMB 342 mn—without subsidies, operations remain loss-making.
Return on capital: ROIC was about -6.7% in FY2025 and about +1.6% annualized in 9M26 (this report's estimate), far below the ~9.5% WACC—the growth-quality gate has not been passed; each incremental yuan of revenue still generates negative economic return, and any valuation premium depends on future margin delivery rather than realized returns.
Capex quality: CapEx plunged from RMB 10.337 bn in the FY2023 construction phase to RMB 3.558/3.335 bn in FY2024/2025 (CapEx/depreciation ~0.92), with prior depreciation entering a digestion period; however, the RMB 20 bn Phase IV 12-inch project has been shifted to Xinlian Advanced, a 25.10%-owned associate (off balance sheet; the company contributes RMB 3.012 bn, of which RMB 2.129 bn paid in), and no split between maintenance and growth capex is disclosed—the judgment that "the depreciation peak has passed" partly relies on asset sales and off-balance-sheet structuring.
Red flags: Return to profitability relies on related-party transactions (see E4); persistently negative free cash flow with reliance on minority shareholders' capital at subsidiary level (RMB 13.292 bn raised across three phases); top-five customers account for 46.99%, the largest 18.69% (FY2025); no dividends since listing, and consolidated retained earnings of RMB -4.909 bn.
Words-deeds consistency: pragmatic and slightly conservative; all verifiable commitments delivered. ① Earnings preannouncement precision: the 9/29 preannouncement deviated <1.5% from actual Q3 results; ② Fourth-generation SiC MOSFET: the FY2025 annual report pledged "mass production expected in Q2 2026," and the 2026 interim report confirmed "mass production achieved"; ③ Depreciation pressure: the FY2025 annual report pledged "equipment depreciation pressure gradually declining, providing core momentum for profit improvement"—H1 depreciation as % of revenue fell 13.84pp YoY, delivered; ④ Refusal to give quantified commitments on the timing of profitability turnaround (e-interaction comments only qualitative: "transitioned from scale construction to profit release channel")—no exaggeration, but also no more transparent breakdown of earnings quality (the Q3 licensing income was not separately disclosed—this period's biggest disclosure gap).
Shareholder friendliness: neutral to weak (structurally constrained). Zero dividends in three years since listing (no distribution in FY2023-2025; legally unable to distribute with unrecovered losses of RMB -4.909 bn); no cancellation-type buybacks (treasury shares relate to equity incentive vesting); no post-IPO dilution via primary issuance at parent level, but in 2025 issued shares + cash of RMB 590 mn to acquire the 72.33% minority stake in Xinlian Yuezhou (share capital +1.324 bn shares), plus continuous introduction of government/AIC capital at subsidiary level—expansion financed via "external transfusion," with minority shareholders trading dilution for capacity.
Risk signals: Large related-party transactions concentrated at the profitability-turnaround node (RMB 1.211 bn of asset sale + licensing to the 25.10%-owned associate Xinlian Advanced); related-party ESOP platforms Rixinrui/Siguinrui sold a combined ~27.27 mn shares in June 2026 at RMB 9.30-9.36 (plan fully executed and terminated early; current price is below their sale price); in August 2026, appointed Guo Yingying, former head of quality at SMIC, as Deputy GM (automotive-grade quality control—neutral to positive).
| Segment | Revenue share | Gross margin | YoY | One-line business logic |
|---|---|---|---|---|
| IC wafer foundry | 75.8% | 3.82% | +6.93% | Core silicon 8/12-inch + SiC foundry; high utilization but still thin gross margin |
| Module packaging | 19.1% | -1.41% | +150.62% | Automotive power modules ramping fast; scale first, gross margin negative |
| R&D services and others | 5.0% | 46.65% | +404.05% | Includes technology licensing; high margin but to related parties and one-off in nature |
Gross profit structure (this report's estimate): FY2025 total gross profit ~RMB 451 mn, of which foundry ~RMB 237 mn (~53%), R&D services and others ~RMB 191 mn (~42%, on just 5% of revenue), module packaging ~RMB -22 mn—the profit mainstay is still foundry, but nearly half of gross profit comes from "R&D services" containing one-off licensing, so the structure is not as healthy as revenue mix suggests. Gross margin spread between highest and lowest is 48pp (46.65% vs -1.41%): licensing/R&D services is IP monetization, foundry is a depreciation-heavy asset business, packaging is still ramping—three businesses stacked in one P&L make consolidated gross margin highly sensitive to the timing of licensing recognition. By application (FY2025): automotive 45.43%, high-end consumer 28.09%, industrial 18.46%, AI 8.02%; 2026H1 growth: AI +84.31%, consumer +31.76%, industrial +21.29%, automotive +3.53%. SiC platform revenue has not been separately disclosed since FY2024 (RMB 1.016 bn); tracking only via market share/ranking.
Accounting red flags: ① R&D capitalization ratio 0% (FY2024) → 5.41% (FY2025) → 20.46% (2026H1, unverified)—a jump from zero within two years; 9M26 capitalized R&D of ~RMB 234 mn equals ~68% of same-period pre-tax profit—initiating capitalization during losses with a sharp ratio rise shifts expenses later and flatters current profit (severity: medium; per the R&D investment tables in annual/interim reports). ② Related-party one-off gains concentrated at the turnaround node: RMB 1.211 bn of asset sale + licensing to the affiliated JV booked disposal gain of RMB 325 mn and attributable licensing income of RMB 256 mn, precisely in the quarter when attributable/non-GAAP profit turned positive (medium). ③ FY2025 accounts receivable +63.0% far above revenue +25.7% (low; company has an explanation and 9M26 growth moderated to 21.7%). ④ Large inventory write-downs becoming routine: FY2025 provision of RMB 979 mn; 2026H1 further provision of RMB 498 mn / reversal on sale RMB 423 mn (low; reflects historical cost-price inversion).
Cross-period consistency: ① Capitalization ratio triple-jumped in two years (see above; company explains "BCD/MCU platform spend meets capitalization criteria"—consistent with statements but timing-sensitive); ② The capex plunge coexists with the off-balance-sheet RMB 20 bn Phase IV—the company's framing that "initial capacity construction is largely complete" is consistent with the JV structure, but it means most incremental depreciation sits off balance sheet, widening the gap between attributable statements and all-in economic profit; ③ Divergence between attributable and consolidated profit: in FY2025 minority shareholders absorbed 69% of the consolidated net loss (RMB -1.338 bn); in 9M26 attributable net profit of RMB 690 mn > consolidated net profit of RMB 340 mn—attributable profitability is turning faster than all-in improvement, and the company has offered no specific explanation of the structure by which minorities absorb losses—the key basis for this report's reservations about the quality of the turnaround.
Current market data (as of 2026-10-23 close): Share price RMB 8.13, market cap RMB 68.15 bn, total shares 8.383 bn. PE(TTM) 122x (TTM attributable profit RMB 558 mn, just turned positive, percentile not representative—reference only); PS(TTM) 6.48x / PS(2026E) ~6.3x (historical PS percentile unavailable; market cap at 92nd percentile since listing as corroboration); PB 4.92x (80th percentile since listing, 87th over 3 years; range 1.97-14.43, median 3.00); EV/EBITDA ~17.5x (~13.8x annualizing Q3 alone); net debt RMB 6.524 bn, net debt/annualized EBITDA 1.53x. PEG ~2.1 (this report's FY2027E PE ~62x ÷ 2026-28E attributable profit CAGR ~30%)—still expensive growth-adjusted, and with ROIC ~1.6% below WACC, the growth-quality gate has not been passed.
What the market has already priced in: Back-solving from a steady-state 25-30x PE implies normalized attributable profit of RMB 2.27-2.73 bn (4-5x TTM), which at a 12% net margin requires revenue of ~RMB 18.9 bn around 2030 (2026→2030 revenue CAGR ~16%, achievable on the revenue side); reverse DCF implies ~8.5% perpetual growth. One-line judgment: the current price demands the company solidify core net margin from ~1% today to 10-12% within three years while sustaining 20%+ revenue growth, whereas the reality is that 9M26 core profit ex-licensing annualizes to only ~RMB 120 mn, the Q3 peak annualizes to RMB 1.63 bn, and the RMB 256 mn licensing gain goes to zero in 2027—the revenue side is mathematically supported by SiC/AI demand; the profit side is the only unproven battleground.
Three-layer value (EPV): Asset value (book value per share) RMB 1.65/share, a replacement-cost floor reference for an asset-heavy foundry; EPV at zero growth ~RMB 0.35/share (normalized FCFF midpoint ~RMB 900 mn: annualized EBITDA RMB 4.28 bn − D&A ~RMB 4.0 bn → EBIT ~RMB 280 mn, after 10% tax + depreciation add-back of RMB 4.0 bn − maintenance capex RMB 2.8-3.4 bn − ΔWC, WACC 9.5%, net debt RMB 6.524 bn bridged; range RMB -0.1 to 1.0); ~96% of the current price is a growth option—for a foundry at the start of a turnaround this is a descriptive fact rather than standalone evidence; valuation judgment is left to the scenario table. On an all-in basis (including the off-balance-sheet Phase IV share and minority loss absorption), EPV would be lower; this report states the upper edge of the conservative-optimistic range.
Three scenarios and odds (exit anchors independent of current price: base-case PE 30-35x = Zhuzhou CRRC's normalized 15.2x × scarce-growth premium; PS 4-4.5x, between Silan Micro's 3.35 and CSMC's 6.37; bear-case PS 2.5x anchored to Sanan's 2.81/bottom zone):
| Scenario | Probability | Fair value range | vs. current price | Swing factor |
|---|---|---|---|---|
| Bear | 25% | RMB 2.8-3.5 | -65.6%~-56.9% | 2027-28 supply wave + resumption of annual price-downs, gross margin back below 20%, licensing to zero + impairments; 2028E attributable profit RMB 0-300 mn |
| Base | 50% | RMB 5.8-7.0 | -28.7%~-13.9% | 2027E revenue ~RMB 13.5 bn / attributable RMB 1.0-1.4 bn; 2028E ~RMB 17 bn / RMB 1.6-2.0 bn; exit PE 30-35x |
| Bull | 25% | RMB 9.5-11.5 | +16.9%~+41.5% | Earlier SiC penetration + AI share above 20%, share 5%→8%; 2028E attributable profit RMB 2.4-2.8 bn; exit PE 40-45x |
Probability-weighted fair value RMB 6.61, -18.7% vs. current price; the price sits in the upper part of the range between base and bull—odds are asymmetrically skewed to the downside. External coordinates: sell-side consensus target price RMB 11.6 (+42.7%) far above this report's bull-case midpoint of RMB 10.5; the disagreement lies in exit multiples; no named institution's pessimistic 2027 earnings forecast was found—the bear case is this report's independent stress assumption (industry supply coordinates: Jibei Consulting's substrate overcapacity and clearing cycle through 2027-28).
Three-way comparison: this report's forecasts vs. management guidance vs. consensus:
| Basis | FY2026E revenue / attributable profit | FY2027E revenue / attributable profit |
|---|---|---|
| This report | RMB 10.2-10.8 bn / RMB 0.95-1.2 bn (incl. licensing RMB 256 mn) | RMB 12.8-14.0 bn / RMB 1.0-1.4 bn (licensing to zero) |
| Management | Revenue above RMB 10 bn, AI share above 10% (no profit guidance) | Not disclosed |
| Sell-side consensus | ~ (lagged) ~RMB 420 mn (upward revisions ongoing) | ~RMB 13.5 bn / ~RMB 800 mn |
Conclusion: Overvalued, not a bubble. The base-case fair value of RMB 5.8-7.0 is the next-period target range; assess quality (8-inch positioning, utilization, cash flow) separately from price—a good company at an expensive price. If Q4-26 and 2027Q1 demonstrate that a 28%+ gross margin can normalize after licensing goes to zero, the base case shifts up and a re-rating will be needed.
Industry space. The company's main business spans two curves. First, SiC power devices — Yole projects the global market to reach about USD 10.3 billion (about RMB 74.0 billion) by 2030, with a 2024-2030 CAGR of about 20% (2024 base of about USD 3.45 billion); Kaiyuan Securities (cited by JW Insights) estimates the global market at about RMB 40.691 billion in 2025, with a 2026-2032 CAGR of 20.5%. The upstream SiC substrate market is expected to grow from about RMB 8.8 billion in 2024 to about RMB 58.5 billion in 2030 (CAGR 37.1%, with conductive-type substrates going from RMB 6.6 billion to RMB 50.1 billion). The parent industry, wafer foundry, had global output value of USD 169.5 billion in 2025 (TrendForce, +26.3%). Second, AI data-center power supply and optical interconnect constitute the second curve: NVIDIA's 800V HVDC architecture enters large-scale commercial use in 2027, with a potential SiC PSU market exceeding RMB 80 billion (JW Insights); the optical chip market is expected to grow from about USD 4.0 billion in 2025 to about USD 15.0 billion in 2031, with silicon photonics' share rising from 32% to 42% (Light Counting, cited in the company's interim report).
Quantified chain of demand inflection: Driving variables — the penetration of 800V high-voltage platforms in new energy vehicles (spreading from the RMB 300k price band to RMB 150-200k models starting 2025) + the switch in AI data-center power architectures; per-unit content — a full-vehicle 800V SiC solution is worth about RMB 6,300-8,000 per vehicle (main drive 4,000-5,000 + OBC 1,500-2,000 + DC-DC 800-1,000; upper-bound figures from 2022 brokerage surveys; actual values are now clearly below this range after the 2024-25 price war and 8-inch cost reductions), 2-3x the silicon-based IGBT solution (RMB 2,000-3,000); penetration ramp — SiC penetration in China NEV electronic controls: 14.1% (2024) → 18.7% (2025, NE Times, installations 1.99 million units → 3.05 million units, +53.4%) → 50%+ by 2030 (53.6% under Yole's xEV methodology); company share — global top-five SiC device maker, about 5% (Yole 2025, cited by the company; FY2024 SiC revenue of RMB 1.016 billion corresponds to about 4-5% global share), and at a 5-8% share in 2030, the company's SiC revenue could reach RMB 3.6-5.8 billion. Every link in the chain has verifiable figures; the only gap is that the company no longer discloses SiC revenue separately.
Supply chain and value distribution: Substrates + epitaxy account for about 70% of SiC device manufacturing cost (substrates ~47%, epitaxy ~23%) — the link with the highest technical and value barriers; dramatic shift in the substrate landscape — SICC topped the global conductive-type substrate market in 2025 with a 27.6% share (51.3% in the 8-inch segment), Wolfspeed filed for Chapter 11 restructuring in June 2025 after losing control of costs, and Chinese substrates now account for over 43% of global shipments; 6-inch conductive substrate prices fell from RMB 4,440/wafer in 2020 to RMB 2,400/wafer in 2024, bottoming and rebounding in 2026. The company sits in midstream device manufacturing (foundry): upstream, it does not lock in substrate supply (substrate oversupply allows foundries to pressure prices — a favorable bargaining environment); downstream, it is tied to OEMs and Tier-1s (2-3-year automotive qualification creates stickiness, but automakers' annual price-down pressure is strong and the company has weak bargaining power); profits currently accrue mainly to upstream substrate makers and IDM brand owners, and foundry profitability has not yet been fully realized — this is precisely the industry footnote to UMC-like companies' margin recovery path, with SiEn's gross margin at only 5.51% (FY2025) → about 20% (9M26).
Supply-demand and competitive landscape: Global SiC power device CR5 is about 91.9% (TrendForce, 2023 revenue basis) — STMicroelectronics leads with 32.6%, followed by onsemi, with Infineon/Rohm behind — a pronounced oligopoly; domestically, IDM and foundry models coexist: Sanan (substrates + devices + tie-up with STMicroelectronics), Silan Micro (IGBT + SiC revenue of RMB 3.273 billion, +43%), China Resources Micro (SiC revenue more than doubling in 2025), CRRC Times Electric (rail-transit IGBT leader, 8-inch SiC revenue up nearly 5x YoY in 2026H1), BYD Semiconductor, with SiEn Integration entering as a pure-play foundry (not competing with customers' branded devices) and evolving toward an IDM model through the consolidation of SiEn Yuezhou. Supply side: 2025 global substrate capacity of about 4 million wafers/year vs demand of about 2.5 million wafers, upstream utilization around 50% and device-line utilization around 70% (Yole), with the shake-out expected to continue through 2027-28; but from 2025Q4 a structural divergence has emerged — automotive-grade and AI-power-grade high-quality substrates/devices are in short supply while low-end general-purpose products remain loose. Entry barriers: automotive qualification (AEC-Q101/IATF16949, 2-3 years of validation), multi-billion-RMB capex for a single 8-inch SiC line, crystal-growth yield and defect-control know-how, and overseas IDM patent portfolios. Substitution threats: silicon-based IGBTs remain the low-cost alternative in 400V platforms and entry/mid-tier models, GaN is entering automotive low-voltage and some AI scenarios, and hybrid modules are delaying full-SiC penetration.
Cyclical and regulatory factors: The industry is in the early phase of "aggregate capacity digestion + structural upturn" — the deep 2024-25 price war cleared low-end capacity; in 2026 substrate prices stopped falling and turned up, with two rounds of price hikes by STMicroelectronics (2026-06-28) and Infineon (07-01) and top players at full production and sales; competition is shifting from price wars to technology and quality (JW Insights, 2026-10). Leading indicators: substrate quotes, utilization/sales-to-production ratios (the company's near 100%), monthly SiC electronic-control installations, new orders (Sanan's SiC MOS orders exceed RMB 7 billion), and the number of new 800V model launches. Regulatory: the Big Fund Phase III (registered capital RMB 344 billion) lists power/third-generation semiconductors as key investment areas; the automotive qualification system and purchase-tax policies underpin baseline demand; if US export controls on equipment to China extend to mature nodes, expansion costs would rise (current power/SiC equipment is largely not on the strictest lists), while China's gallium/germanium export controls indirectly favor domestic substitution.
Peer benchmarking (2026-10-23; revenue/growth on FY2025 basis; valuations frozen at the anchor date):
| Company | Revenue (RMB 100M) | Growth | Gross margin | ROE/Net profit | PB | Model difference |
|---|---|---|---|---|---|---|
| SiEn Integration | 81.80 | +25.67% | 5.51% (about 20% in 9M26) | Attributable -5.95 → 9M26 +6.90 | 4.92 | Pure-play foundry + one-stop system foundry, no competition with customers |
| China Resources Micro | 110.54 | +9.24% | ~25.5% (improved by full utilization and price hikes in 2026) | 2.91%; 2026H1 attributable net profit RMB 722M | 3.00 | Full-chain IDM + own brand; profitability already realized |
| Silan Micro | 130.52 | +16.32% | 18.83% | Net margin ~1.1%; attributable +81% | 3.54 | IDM, IGBT & SiC RMB 3.273B; 8-inch line just qualified |
| Sanan Optoelectronics | 179.49 | +11.45% | ~13.6% | Attributable -RMB 353M, turning to loss | 1.45 | Substrate + device vertical integration, going overseas via STMicroelectronics tie-up |
| CRRC Times Electric | 287.03 | +15.23% | N/A | Attributable RMB 4.10B (net margin 14.3%) | 1.48 | Rail-transit IGBT self-supply + automotive-grade IDM; solid profitability |
| SMIC (reference) | ~680 (2025E) | — | 22% (25Q3) | — | 5.20 | Advanced-node foundry, different track |
Company positioning: No.1 domestic SiC power device foundry and global top-five (about 5%, Yole 2025, cited by the company); No.5 globally in MEMS foundry; share trending up (revenue +25.67%, wafer output 2.5127 million 8-inch-equivalent wafers +24.68%, near-100% sales-to-production ratio, automotive revenue at 45.43% of total, deep partnerships with 8 mainstream automakers, Li Auto's 8-inch SiC wafers already rolled off the line). Its 8-inch capacity (7,000 wpm, planned 15,000 wpm) creates a dimensional advantage over Silan Micro (5,000 wpm ramping) and Sanan (1,000 wpm), but Nexperia-ST's 480,000 wafers/year (2028) and STMicroelectronics' Catania fab (production 2026) will erase this gap within two years. Moat: automotive qualification and automaker systems-project stickiness (25 new systems projects added in 2025), switching costs from single-platform coverage spanning "8/12-inch silicon + 6/8-inch SiC + GaN + MEMS," and government capital sharing the heavy-asset burden (Phase III RMB 13.292B + Phase IV external RMB 6.35B already signed). Weaknesses: heavy depreciation suppresses profitability, 18.69% concentration in the largest customer, and most of the value-chain profit is captured by branded device makers (IDMs).
A generic framework can easily miss four defining dimensions of the foundry business; each is covered below:
Overall rating: Neutral (avoid), confidence 0.55, 12-month horizon. The company's fundamentals are on a clear improvement path (utilization, depreciation dilution, 8-inch SiC positioning, positive cash flow), but the current price of RMB 8.13 already prices in a base-plus scenario: 16%-40% above the base fair value of RMB 5.8-7.0 (16.1% above the range's upper bound of RMB 7.0, 40.2% above the lower bound of RMB 5.8), with a probability-weighted expected return of -18.7% and negative margin of safety (-28.7% to -13.9%). The divergence from sell-side consensus (target price RMB 11.6) lies in exit multiples and margin normalization, not revenue.
Strategy: Do not chase at current prices. Two re-evaluation triggers: ① price falling back into the RMB 5.8-7.0 base range (odds turn favorable); ② evidence upgrade — Q4 single-quarter gross margin (after license-fee effects fade) ≥25% and the Jan-Feb 2027 earnings preannouncement showing core recurring annualized profit of ~RMB 1 billion taking over, at which point the base case moves up and a full revaluation is required. Falsification triggers: Q4 gross margin <25% (price-passthrough falsified), attributable profit falling by more than half YoY in 2027 after license revenue goes to zero, or substrate/foundry quotes turning down for two consecutive quarters (price war restart).
Risk disclosures and monitoring points (presented narratively, not as a mechanical checklist): ① realization of core profitability after 2027 license income goes to zero (primary); ② the 2027-28 8-inch SiC supply wave (Silan Micro 420,000 wafers/year, Nexperia-ST 480,000 wafers/year completed 2028, STMicroelectronics Catania in production 2026) and automotive price-down passthrough; ③ R&D capitalization rate and the pace of inventory write-downs (reported earnings are sensitive to accounting judgments); ④ the rolling debt-servicing structure of net interest-bearing debt of RMB 6.524B and short-term interest-bearing debt of RMB 5.815B exceeding cash-like assets of RMB 3.908B, plus potential refinancing dilution; ⑤ share reductions by related shareholders (Rixinrui/Guixinrui) and the ~512 million-share unlock tranche in 2028-09; ⑥ the impact of escalated equipment export controls on the pace of capacity expansion.
This report uses the 2026-10-23 closing price of RMB 8.13 (completed_close) as the price anchor; all multiples, market caps, and scenario calculations are based on this anchor. Data from other dates are labeled with their time points. Report date: 2026-10-26.