Fair-Value Report — SICC Co., Ltd. (2631.HK)
Insider Signal
Buyer: Point72 Asset Management, L.P. / Steven A. Cohen and affiliated entities (Point72 Capital Advisors, Point72 Associates, Point72 Capital Holdings, Point72 Capital International, Point72 L.P.)
Nature: Genuine open-market on/off-exchange purchase (HKEX reason codes 1101/1103). Point72 is a multi-billion-dollar conviction hedge fund — not a broker, custodian, or nominee.
Dates: 7 August 2026 | Shares purchased: approximately 477,700 H-shares | Purchase price: approximately HKD 71.51
Post-transaction holding: 6.01% of total shares (H-class); prior holding ~5.14%. Total H-share position: ~3.3 million shares, market value approximately HKD 273M at current price.
Conviction note: Point72 was already a substantial shareholder before this incremental buy, signalling continued accumulation rather than a first entry.
Verified Snapshot
FX used throughout: 1 CNY ≈ 1.068 HKD (Aug 2026 indicative). All company financials in CNY (reporting currency). HKEX prices in HKD. Sources: FY2025 annual report (CNINFO, March 2026), SSE inquiry-letter response (HKEX, June 2026), Q1 2026 quarterly report (April 2026), stockanalysis.com, Sohu Finance.
Business
SICC Co., Ltd. (山東天岳先進科技股份有限公司, "Tianyue Advanced") is the world's largest silicon carbide (SiC) substrate manufacturer by market share, with 27.6% global share, 27.5% in 6-inch, and 51.3% in 8-inch SiC substrates. It is a dual-listed entity: A-shares on the STAR Market (688234.SH) since 2022, H-shares on HKEX main board since 20 August 2025 (raising ~HKD 2.04B at HKD 42.80). Headquartered in Jinan, Shandong, it operates two production bases (Jinan and Shanghai Lingang), with a Malaysian overseas factory entering the planning stage as of mid-2026.
SiC substrates are the critical raw material for SiC power devices used in EV inverters, AI data-centre power conversion, photovoltaics, rail, and 5G base stations. SICC sells primarily to leading global power semiconductor manufacturers (IDMs and fabless alike). Its product split: conductive substrates (automotive-grade / non-automotive-grade) for power electronics; semi-insulating substrates for RF/microwave.
2025 Crisis — What Went Wrong
The company had returned to profitability in 2024 (net profit ~CNY +65M). In 2025 the story reversed sharply. Volume surged 75.3% YoY — but a violent price war in domestic China markets, especially in non-automotive-grade 6-inch substrates, caused revenue to fall 17.1% simultaneously. Product-level detail from the SSE inquiry response:
| Segment | Volume change | ASP change | GM change (pp) |
|---|---|---|---|
| Automotive-grade (车规级) | +18.9% | −40.8% | −12.1pp |
| Non-automotive-grade (非车规级) | +395.9% | −53.1% | −56.6pp |
| Semi-insulating (半绝缘型) | +25.7% | modest decline | decline |
| Export — 8-inch automotive | growing | stable premium | 39% GM (2025) |
Q4 2025 was catastrophic: non-automotive-grade 6-inch ASP collapsed from CNY 864/piece (Q1–Q3 average) to CNY 409/piece in Q4 (−52.6%), pushing Q4 gross margin to −66.8% and Q4 net loss to −CNY 209M — larger than the full-year loss. One-time items compounded the damage: historical tax adjustments, asset impairments, FX losses, and IPO listing costs. The company acknowledges these are largely one-time in nature.
Q1 2026 shows recovery: gross margin rebounded to 19.1% (vs −66.8% in Q4 2025, and vs 39.3% in Q1 2025). Revenue continues to contract −10.4% YoY. Net loss narrowed to −CNY 60.5M. This suggests the Q4 2025 price collapse was a trough, not a trend.
Valuation
Method: P/B Primary (loss-making company — no FCF-DCF)
Per institutional analysis convention, profit-oriented DCF is inappropriate for a company with negative net margins and negative Q4 2025 gross margins. We use P/B as the primary lens, anchored on recovery of return on equity, with EV/Revenue for peer cross-check. A forward scenario model (not a DCF but a sensitivity) confirms the magnitude of the implied recovery baked into the current price.
P/B Scenario Table
Book value per share: CNY 14.80 / HKD 15.83 as of 31 Dec 2025 (will erode slightly through 2026 as losses continue). Probability weights: 25% bull / 50% base / 25% bear.
| Scenario | Wt | Thesis | P/B multiple | FV/H-share (HKD) |
|---|---|---|---|---|
| Bull | 25% | 8-inch dominance accelerates; export mix shifts to premium automotive; ASP recovery brings GM back to 25%+ by 2028; ROE 15–20% by 2029. Government policy mandates domestic SiC sourcing. | 6.0× | 95 |
| Base | 50% | Gradual margin recovery; domestic price war eases but doesn't fully resolve; revenue grows modestly from 2027; breakeven by 2028; ROE 5–8% by 2030. H-share discount persists at ~25%. | 3.5× | 55 |
| Bear | 25% | ASP continues lower; US/Western restrictions intensify, crimping the premium export market; Chinese rivals erode share; losses persist through 2027; book value erodes 15–20%. | 1.5× | 24 |
| PW Fair Value | HKD 57 | |||
| + Strategic Premium | Dominant market position, government backing, scarcity as only HKEX-listed pure-play SiC substrate company warrants a 20–25% premium over fundamental P/B. | +20–25% | HKD 68–72 |
Current price HKD 82.75 sits approximately 15–45% above our fair value range. At the signal price (HKD 71.51), the risk/reward was borderline-acceptable (within the upper end of our range including strategic premium). At HKD 82.75, the risk/reward has deteriorated.
Reverse Read — What the Price Implies
At HKD 82.75 (total-share implied market cap CNY 37.5B), the market is pricing in: (a) a return to 15–25% operating margins AND (b) revenue growing to CNY 8–12B within 10 years at a 11.88% cost of capital. Our forward scenario model finds NO conventional growth/margin combination that reaches this NPV under a 10-year horizon. Even a scenario with 40% CAGR over five years followed by 20–25% margins produces a DCF fair value of only CNY 18/share (HKD 19). The gap between DCF and market price reflects a "China strategic premium" — well-documented for dominant players in policy-backed sectors — that cannot be measured by fundamental models alone.
Peer Comparison
Note: No perfect pure-play SiC substrate peer is publicly listed. Wolfspeed (WOLF) is vertically integrated (substrate + epitaxy + devices). Data approximate; non-SICC figures sourced from public filings / financial aggregators; flagged where uncertain.
| Company | Ticker | Mkt Cap | EV/Rev | Rev Growth | Gross Margin | P/B | Notes |
|---|---|---|---|---|---|---|---|
| SICC (H-share basis) | 2631.HK | HKD ~40B* | ~25× | −17% | 13% | 5.2× | *Total shares × H price; loss-making |
| Wolfspeed | WOLF.US | ~USD 1.5B | ~2.5× | −7% | ~10% | <1× | Post-Ch.11 restructuring; substrates+devices |
| Coherent | COHR.US | ~USD 12B | ~2.5× | +10% | ~40% | ~2× | Broad compound semiconductor; not pure SiC |
| San'an Optoelectronics | 600703.SH | ~CNY 50B | ~5× | +5% | ~30% | ~3× | LED + SiC substrate; more diversified |
| Resonac Holdings | 4004.T | ~JPY 700B | ~1× | +5% | ~30% | ~1.5× | Japanese specialty chemicals incl. SiC materials |
| Peer Median | — | ~2.5× | ~+5% | ~30% | ~1.75× |
SICC trades at approximately 10× the peer median EV/Revenue and 3× the peer median P/B. This extreme premium reflects (a) the pure-play SiC substrate scarcity in public markets, (b) the China government-backed strategic positioning, and (c) dominant market share in the high-value 8-inch segment. It is NOT justified by current financial metrics, which are the weakest in the peer group (only company with negative margins). The premium narrows significantly if Western peers re-rate upward as the SiC cycle recovers.
Conclusion & Rating
Rating: HOLD — signal was valid at HKD 71.51; at HKD 82.75 risk/reward is unfavourable
- Insider signal: Genuine. Point72 (Steve Cohen's fund, ~USD 46B AUM, one of the world's highest-returning hedge funds) has been accumulating and added ~477,700 H-shares at ~HKD 71.51 on 7 Aug 2026 to reach 6.01% of total shares. This signals serious conviction about a multi-year thesis, likely based on 8-inch SiC dominance, export mix recovery, and industry ASP stabilisation.
- Fundamental picture: Loss-making (FY2025 net loss −CNY 208M), revenue declining, gross margins collapsed from 26% (2024) to 13% (2025) driven by a catastrophic domestic price war. Q1 2026 shows gross margin recovering to 19.1% — encouraging, but losses continue.
- Valuation: At HKD 82.75, the stock trades at 5.2× P/B and approximately 25× EV/Revenue — 10× the SiC/semiconductor peer median EV/Revenue. Our probability-weighted P/B fair value is HKD 57 (fundamental) to HKD 68–72 (with strategic premium). The current price is 15–45% above this range. Our forward scenario model finds no conventional revenue growth + margin path that justifies a per-share price above CNY 18 (HKD 19) on a DCF basis within a 10-year horizon.
- Upside catalysts: H1 2026 results (due by 31 Aug) showing margin recovery above our base case; industry ASP stabilisation confirmed by customer commentary; government procurement mandate at higher prices; further institutional accumulation driving short-squeeze dynamics in the thin H-share float.
- Near-term price action: The stock is up 15.7% in six days — some of this likely reflects the public DI disclosure and the 11 Aug investor meeting. A pullback toward HKD 68–75 would align with our strategic-premium FV range and restore a more acceptable risk/reward.
Sizing: position sizing should be limited given extreme valuation and micro-cap H-share float (HKD 4.5B); volatility will be high around H1 2026 results release (by 31 Aug 2026). This is explicitly a high-risk speculative situation.
Key Risks
- Continued domestic price war: Chinese SiC suppliers have massively expanded capacity; if non-automotive-grade prices fail to recover, domestic gross margin remains negative.
- Geopolitical / trade restrictions: US sanctions or export controls could restrict SICC's access to Western EV/industrial customers, where the high-margin 8-inch automotive product is sold.
- Equity dilution: Company in losses; future fundraising rounds (A-share or H-share) cannot be ruled out if capex demands continue alongside losses.
- Slow margin recovery: Q1 2026 GM of 19.1% is still well below the 26% peak; operating leverage is insufficient to cover elevated opex (selling + admin + R&D = 23.5% of revenue in Q1 2026, up 83% YoY).
- A-share lock-up expiry: Pre-IPO A-share holders face staged lock-up expirations; incremental A-share supply could pressure both A and H prices.
- Thin H-float: 54.9M H-shares outstanding creates liquidity risk; large holders (Point72 at 6%) can move the price significantly.
- H1 2026 results (catalyst/risk): Due by 31 Aug 2026. If losses persist at the Q1 2026 pace (−CNY 60M/quarter), the market may re-price; if margin recovery accelerates, it supports the bull case.
Sources
- SICC 2025 Annual Report (CNINFO, 27 Mar 2026) — primary Chinese-language source
- SICC 2025 Annual Report (HKEX English version, 23 Apr 2026)
- SSE Inquiry Letter Response — 2025 Annual Report (HKEX, 26 Jun 2026; translated excerpts used)
- SICC Q1 2026 Quarterly Report (Eastmoney / Sina Finance, Apr 2026)
- HKEX Disclosure of Interests — Point72 / Cohen, filed 7 Aug 2026 (signal data)
- SICC Investor Meeting Transcript summary (11 Aug 2026)
- stockanalysis.com — market data as of 13 Aug 2026
- Sohu Finance — A-share price 688234.SH, approximately 13 Aug 2026
- Wolfspeed Q3 FY2026 earnings release (May 2026)
- Damodaran NYU Stern implied ERP / country risk tables
- WACC computed via proprietary wacc.py (CAPM, beta=1.5, rf=2.0%, ERP=8.0%, WACC=11.88%)
No redactions applied.
Published via wiis. Originals are encrypted at rest; this page reflects the redacted version. report abuse.
Discussion
No comments yet.