Main points of investment:

Coal mine safety monitoring equipment started, endogenous epitaxy built into a semiconductor dicing machine domestic leader, traditional + emerging business collaboration, 1: 1 > 2.

(1) Company profile: founded in 1994, officially entered the field of Internet of things safety production monitoring in 2002, Department of domestic coal mine safety monitoring equipment leader, 16-19, through the merger and acquisition of LP, LPB and ADT three overseas high-quality targets, endogenous epitaxy to achieve comprehensive localization of high-end semiconductor dicing machine equipment, efficiently built into a domestic semiconductor scribing machine leader, 22 years selected the fourth batch of national specialist new "Little Giant". Internet of things safety production monitoring + semiconductor equipment two major business coordinated development, "1x 1" > 2. (2) ownership structure and management: the ownership is relatively concentrated, and the proportion of shares held by the actual controller is 40.34%. The current management has rich engineering and management experience in the Internet of things and semiconductor industry. (3) accelerated localization of high R & D: 21 years and the high growth of 22H1 R & D expenses, vigorously promote the localization of slicing machine.

Closed test equipment home-made to replace the high boom, security monitoring business is stable and good. (1) Semiconductor closed test equipment-Optical Power main dicing machine: for cutting wafers, it is the key equipment for cutting and packaging IC devices. The global market size in 21 years is about 1.96 billion US dollars. The industry market is highly concentrated. Japan's DISCO accounts for 70% of the market share, while Optic subsidiary ADT ranks third in the world, but only about 5% of the domestic market. Domestic dicing machine manufacturers started relatively late, and there is still a gap with the international leading level in cutting accuracy and other indicators. China is the center of closed testing, and the demand for advanced equipment upstream driven by advanced packaging is growing: the semiconductor closed test market will reach 251 billion yuan in 2020, of which the three major closed test manufacturers of Chinese mainland have a combined market share of about 21%. In recent years, the capital expenditure of the domestic closed test leader has increased year by year, and the high β of the industry provides a broad domestic alternative space for the domestic equipment leader. (2) Coal mine safety monitoring: the demand growth is driven by the prosperity of coal enterprises and policy increase. (1) Coal mine gas, dust and other monitoring requires extremely high sensor performance. The market scale of gas drainage monitoring and dust monitoring in the past 21 years is about 3.3 billion yuan, and light power is the leader in this field.

(2) the boom of coal enterprises and policy increase drive the growth of demand: the national coal production has been increasing continuously in 17-21 years, which promotes the increase of downstream demand for coal mine safety equipment. The concentration of coal enterprises is increased, and the superposition policy is beneficial to the development of the industry.

Semiconductor closed test platform giant on the way. (1) the optical power local semiconductor dicing machine has been ordered by an enterprise for head closure testing, and delivery has begun one after another:

Led by the local R & D team, 8230 of the most mainstream and advanced 12-inch wafer cutting and scribing equipment in the industry has been successfully localized. By the end of 2021, the slicing machine produced by the company has received product orders from a number of head-closed testing companies, including Sunlight and Huatian Technology, and has been delivered to customers one after another. The fixed growth project will expand the local dicing machine to 500 sets / year production capacity, opening up new momentum of growth. (2) issue convertible bonds plus 5200 / annual capacity air spindle: through the acquisition of LPB, the company has become one of the earliest enterprises to intervene in the field of air spindle in China, plus 5200 / annual capacity air spindle to create the second growth curve of the semiconductor end, after reaching production, it will achieve annual sales income of 455 million yuan and annual net profit of 88 million yuan. (3) the advantage of the integration of the whole machine + core devices is obvious: the company is one of the only two enterprises in the global industry that can provide cutting and cutting mass production equipment and core components (air spindle, blades and other consumables) at the same time. In addition, laser cutting machines and grinding machines are being developed, constantly enriching the product matrix of closed testing equipment, and semiconductor equipment platform companies are on the way.

Profit forecast and valuation: the company is the leader of domestic semiconductor dicing machine. After the fixed increase project reaches production, it will have a total production capacity of 500sets / year and raise funds to expand 5200 air spindles / annual production capacity. In addition, traditional coal mine and electric power safety monitoring business can contribute to stable cash flow. We predict that the 22-24 year net profit of the company will be 1.14,2.10 and 318 million yuan, and the current stock price will be 56x/31x/20x corresponding to PE. Using segment valuation method, semiconductor closed test equipment manufacturing business: refer to industry average PE valuation, give the company 23-year 42xPE (estimated 23-year homing net profit is 119 million yuan, corresponding to market capitalization is 5.01 billion yuan); security monitoring business: considering the company's higher gross profit level, give the company a slightly higher 23-year 25xPE (23-year homing net profit is 90 million yuan, corresponding to market capitalization is 2.26 billion yuan). With reference to industry valuation, the company is given a 23-year target market capitalization of 7.27 billion yuan, corresponding to a target price of 20.7 yuan, which is 13.2% higher than the current stock price, and is given a "overweight" rating for the first time.

Risk hints: the risk of failure in technology and product innovation, the risk that the sales of new dicing machines are less than expected, and the risk of policy change in the coal industry.