SICC (688234.SS): 8-inch SiC substrate in expansion driving product mix upgrade; enhancing yield rate to support GM expansion; Neutral

We remain positive on SICC fundamentals and expect its revenue and GM to improve on the back of (1) increasing 8-inch product mix, (2) stabilizing substrate prices supporting blended ASP, and (3) improving yield rates supporting cost reductions. We expect the increasing contribution from 8-inch products to support the company's revenue growth, while continued product mix upgrade, yield improvement and cost reductions should drive GM expansion. As we highlighted in Sep, management sees the rising adoption of SiC in EVs, penetrated into more budget level models, empowering fast charging. The rising penetration of SiC power semis in AIDC also brings upside to the company. As we highlighted in Aug, the expanding applications of SiC in advanced packaging, AR glasses, and AR HUD, offer opportunity to the company's 12-inch SiC substrate, further driving its product mix upgrade and enjoy healthier competition. Maintain Neutral on fair valuation.