The 2023H1 performance has maintained a high growth trend, and the expansion of production capacity continues to guarantee growth potential. The company is a leading supplier of semiconductor cleaning equipment (fan filter units) and consumables (filters) in China. Benefiting from the acceleration of semiconductor localization and the increase in cleaning demand in the downstream sector, the net profit CAGR for the past three years has reached 20.0%, and 23H1 return net profit YoY +21.2%. In June 2023, the company signed a cooperation agreement with the Nanjing Jiangning Development Zone Management Committee. It plans to build a new high-end equipment manufacturing project, which will promote the expansion of the company's high-end equipment production capacity and product development, and further enhance competitiveness.
Short-term: Demand for domestic equipment has increased dramatically under the replacement of localization, and company orders have grown strongly. The company is a leader in semiconductor cleaning equipment in China. As the domestic substitution process accelerates, demand for domestic clean equipment has increased dramatically. The company's current orders are full, and the production capacity utilization rate has been 100% + for three consecutive years; starting this year, along with the continuous expansion of production capacity in the two phases of investment, the company's domestic production penetration rate is expected to increase further.
Mid-term: Semiconductors have a strong clean advantage, and domestic substitution and overseas expansion drive growth together. The company is already ahead of domestic manufacturers in terms of product strength and brand reputation against overseas leaders, and has formed an oligopoly competition with CAMFIL and AAF international giants in the domestic market. Future domestic market capacity expansion combined with domestic substitution dividends will bring about a broad increase in orders. At the same time, the company is accelerating its overseas expansion, has obtained certification from overseas leaders such as Intel and ST and international standards such as ISO and ASHRAE, and continues to deliver product samples. With the help of the management team's comprehensive overseas background, cost-effective products, and overseas production sites in Malaysia and Quebec, the company's overseas business can be expected to grow.
Long-term: High-margin consumables provide profitable safety cushions, and many fields work together to enjoy new growth. Semiconductor cleaning equipment has high barriers and high value characteristics, and the demand for stock replacement brought about by its filter consumables properties will bring continuous profit support to the company. Along with the accelerated release of clean demand in downstream fields such as new energy, pharmaceuticals, and atmospheric treatment, the long-term growth of the company's performance also has sufficient momentum.
Profit forecast and investment suggestions: The company's net profit is estimated to be 173/251/327 million yuan from 2023 to 2025, corresponding to the latest PE of 28/20/15. Referring to comparable companies and growth rates, 35 times the PE valuation in 2023 is given, corresponding to a reasonable value of 45.15 yuan/share, maintaining the “buy” rating.
Risk warning: orders fall short of expectations; overseas expansion falls short of expectations; fundraising projects fall short of expectations.