Tianfu Thermoelectric SiC wafer lifting evaluation

General view market, Tianfu Thermoelectric (7.07, -0.04, -0.56%) (600509) is a pure ThermoElectron Corporation. We do not deny that the company is currently the main business for the heat and electricity, but the company's SiC chip (silicon carbide chips) and other services will give its profit model, a substantial change in the income situation and valuation.

Silicon carbide crystal industry with huge technical barriers and broad market prospects, and the company is currently the only manufacturer of SiC crystal, compared to the cost of production and production of silicon carbide crystals the world's largest enterprise Cree company, but also has a very big competitive advantage. Therefore, to give the company recommended investment rating. The company expects from 2006 to 2009 earnings per share were 0.126, 0.421, 0.863 and 1.258 yuan. According to the business valuation of the company's target price should be 11.26 yuan.

SiC wafer is the only manufacturer in china. Silicon carbide wafer has three main purposes: first, as a substrate for LED solid lighting industry, the two is applied to semiconductor devices, and the three is used in the jewelry industry. There is no domestic commercial silicon carbide wafer manufacturer, currently only Beijing tankeblue semiconductor company with SiC chip production capacity of small scale. Beijing tankeblue semiconductor Limited Liability Company by Shanghai huiheda investment management company (Tianfu Thermoelectric subsidiary), Chinese Institute of physics, Singapore Jetion's Blu ray technology Limited Liability Company joint venture.

Company SiC wafer project cost advantage. The company SiC project supported by the national 20 million yuan of special funds to support, in November 2005 through the departments of the organization project acceptance, with independent intellectual property rights and the technical route, the main indexes of the product reach foreign congener product level.

At present, the main bottleneck of silicon carbide semiconductor industry development is the high price of raw material: in 2004, a 2 inch silicon carbide wafer prices above $500, above the wafer materials prices as high as 40% of the cost of silicon carbide semiconductor devices; and because the silicon carbide wafer production for 2005, for the study of the 2 inch silicon carbide wafer prices rose 33%.

The market is in urgent need of new technological advances to achieve large-scale production of silicon carbide wafers, reduce costs, meet the rapidly growing market demand, and further expand the market size. The Future Ltd's products has great advantages in cost: the cost of the product is about $100, and the main competitors will cost approximately $300, Zhandexianji which will make the company's products in the international market development.

Will occupy the third generation of semiconductor materials industry chain commanding heights. Silicon carbide products have been produced and carried out in small quantities, the future will be mass production. A silicon carbide wafer as the most upstream of the LED and the third generation semiconductor industry chain, industry chain is the highest technical barriers in sub sectors, is the core and foundation of the industrial chain, the company will through the production of SiC chip to occupy the high ground of the future of the industry chain, so as to obtain rapid development and high yield.

At the same time, the company will also be an extension of the industrial chain, to the extension, packaging, LED production and other downstream sectors, and the United States Cree company should be seen as a template for the future development of the company. We believe that Tianfu Thermoelectric will become China's Cree".

Earnings forecast value list 2003A2004A2005A2006E2007E2008E

The main business income ($million) 505.37704816.18

The growth rate (%) 11.78 39.3 15.93

Net profit (million) 60.31 60.2363.94 19.02 87.5162.32

The growth rate (%) 29.230.136.1670.25360.0485.51

Earnings per share 0.240.24 0.250.075 0.345 0.64

Price earnings ratio 27.527.5 26.48819.13 10.31

PEG0.94207.324.291.25 0.050.12