Safety monitoring is the main, epitaxial plus code semiconductor closed test dicing machine equipment. Since its establishment in 1994, the company has focused on coal mine safety monitoring equipment and systems. In 2016 and 2017, it acquired 70 per cent of LoadPoint Limited& LoadPointBearings Limited (currently wholly owned) in the UK and cut into the closed testing industry chain such as semiconductor dicing machine and air spindle. According to the 2021H1 financial report, safety monitoring accounts for 61 per cent of revenue and 63 per cent gross profit margin, and semiconductor closed test equipment accounts for 39 per cent of the main cash flow. And in October 2019, Advanced Microelectronic equipment (Zhengzhou) Company acquired ADT, the world's third largest dicing machine company, and acquired the remaining stake of 95% in August 2021. In addition, the company exhibited the world's leading 12-inch biaxial automatic wafer cutting machine 8230 series at SEMICON China International Semiconductor Exhibition in June 2020, and launched the 6110 series of Applied Materials Inc cutting equipment for the third generation semiconductor in March 2021.

The domestic share is less than 5%, and the company has decided to increase and expand production to speed up the localization of dicing machine equipment. Semiconductor wafer dicing machine is mainly used for packaging. It is a device that divides wafer wafers containing many chips into wafer particles. At present, the industry is mainly mechanical slicing, including spindle, control system, etc., because the cutting substrate is semiconductor devices, so the product yield and control requirements are higher. From the perspective of the pattern, foreign suppliers such as Japan DISCO, Tokyo Precision, Israel ADT and other monopolies, with reference to DISCO financial data, we expect the market size to be about 5 billion yuan; Optic has successively extended ADT and other high-quality companies to lay the technology and customer foundation. According to the company announcement, the company plans to expand production by 550 million sets of semiconductor precision slicing equipment and systems. After reaching production, the project forms an average annual income of 640 million yuan and an average annual net profit of 95 million yuan. According to the announcement, the project products have obtained DEMO orders from more than 20 customers, including domestic mainstream closed test manufacturers, and it is expected that the order will be officially opened in 2021 for domestic replacement.

Traditional business: stable growth such as coal mine monitoring brings cash flow. The company's traditional business is mainly coal safety control system and equipment. With the supply-side reform and the demand for coal equipment informatization in recent years, the company's gas monitoring, dust monitoring system and equipment have achieved good growth. According to our rough statistics, the annual market size is about 5 billion yuan. As a system integration-driven enterprise product, the company is ahead of its competitors in terms of adaptability, range ratio, maintainability, efficiency and so on. And the company card position in Henan Province, a major coal-producing province, while adjacent to Shanxi, Shandong, Anhui, Shaanxi, Hebei and other provinces rich in coal resources, can achieve rapid response service to strengthen customer stickiness.

Profit forecast: we forecast that the company's revenue from 2021 to 2022 will be 6.06 yuan and 1.011 billion yuan respectively, an increase of 95% and 67% over the same period last year. 5 billion yuan, an increase of 121% and 91% over the same period last year, corresponding to PE 56 and 29 in 2021-2022. We are optimistic about the localization opportunities brought by the company's increased production, expanded layout, semiconductor closed test back-end slicer and other closed test equipment, with reference to the comparable company's valuation and competitive position, as well as the inflection point of the slicer's business volume in 2021, covering it for the first time and giving it a "buy" rating.

Risk tips: fund-raising projects are not as expected; M & An integration risk; market competition risk; industry space measurement deviation; research and reporting information update risk and so on.