Event description

Mei-E Technology 2023H1 realized operating income of 652 million yuan, an increase of 15.00% over the same period last year, and net profit of 77 million yuan, an increase of 21.23% over the same period last year, deducting 67 million yuan of non-return net profit, an increase of 9.60% over the same period last year.

Event comment

The release of domestic production capacity instead of superimposed capacity leads to steady income growth. The company's operating income grew steadily in the first half of the year, mainly because the semiconductor industry was affected by Sino-US scientific and technological competition, and there were more new orders brought about by domestic substitution. in addition, some semiconductor manufacturers are continuing to increase their investment in Southeast Asia, relying on the advantage of global layout, overseas income has also made a greater contribution.

In addition, with the growth of the company's customer base, there has been a continuous increase in consumables revenue from operating projects. In addition, under the background of carbon neutralization and carbon peak, the national policy gradually tightens the control of oil mist, dust, VOCs and other air pollutants produced in the industrial production and processing process, the company has developed a series of products to meet the downstream demand, and customers have also gradually expanded to Guoxuan high-tech, Dangsheng technology and other new energy industries, forming revenue growth points. Generally speaking, the steady rise in downstream demand leads to the growth of the company's performance, and the higher growth rate of homed net profit in the first half of the year is mainly due to the impact of non-recurrent gains and losses such as government subsidies and entrusted investment income.

In the first half of the year, the comprehensive gross profit margin decreased slightly, and the rate of sales expenses increased. 2023H1's annual comprehensive gross profit margin was 27.68%, which decreased 1.06pct compared with the same period last year. It is estimated that: 1) the company is still dominated by new business in the current revenue composition, and the company selectively reduces the gross profit margin of fan filter unit products to obtain a higher market share; 2) the gradual increase in the proportion of consumables in the product structure leads to a rebound in the comprehensive gross profit margin, but because the proportion of consumables is still low, the impact of this factor is relatively weak. 3) the effect of cost reduction driven by the localization of glass fiber and PTFE has not been shown for the time being, and the gross profit margin of the company is expected to increase in the medium and long term in the future. During the period of 2023H1, the expense rate increased by 1.33pct to 16.48% compared with the same period last year, of which the sales expense rate increased by 1.07pct to 7.04%, the management and R & D expense rate increased by 0.69pct to 8.79%, and the financial expense rate decreased by 0.41pct to 0.66%.

Cash flow has improved significantly and will continue to improve with the increase in the proportion of consumables in the future. 2023H1's cash-to-cash ratio was 97%, which was 14.6% higher than the same period last year. At the end of June, the company's accounts receivable fell by 6 million yuan to 590 million yuan compared with the end of last year, indicating that the company has made initial achievements in strengthening the control of sales and payback. In addition, the proportion of consumables income with good cash flow has increased, and the proportion of overseas income has also further improved the company's cash flow. In the first half of the year, the company's net-to-current ratio also turned positive to 45%, compared with a negative value in the same period last year. This year, the company is expected to account for nearly 30% of the company's consumables revenue, and the company's cash flow will continue to improve with the further increase in overseas share and consumables share in the future.

Capacity expansion leads to a continuous improvement in future performance. With the intensification of Sino-US trade friction in the high-tech industry, the trend of domestic substitution in the semiconductor industry is gradually accelerating. in addition, the trend of semiconductor industry migration to Southeast Asia is becoming more and more obvious. The company's existing capacity utilization has been in a state of saturation. As the fund-raising project is gradually put into production in batches (during the 3-year construction period, after the production expansion project is completed and put into production, the production capacity of FFU&EFU purification equipment / high efficiency filter / junior high school filter / electrostatic filter is increased by 94.7% compared with 2021), the production and sales volume of the company is expected to increase steadily, which will lead to an increase in revenue and profits. It is estimated that the net profit from 2023 to 2024 will be 180 million yuan and 240 million yuan respectively, an increase of 45.72% and 32.72% over the same period last year. The current share price corresponds to a "buy" rating of 22x and 17x for PE in 2023 and 2024, respectively.

Risk hint

1. The risk of the fund-raising project is lower than the expected risk

2. Overseas expansion is not as risky as expected.