In the first three quarters of 2023, the company achieved revenue of 256 million yuan (+45.16%), net profit of 51 million yuan (+50.63%), and net profit after deducting non-net profit of 43 million yuan (+68.68%). Revenue continued to grow rapidly, and R&D investment continued to increase. The company perfected the DFT business layout, continued to expand the EDA product line, and software and hardware collaborated to create industry-leading yield improvement solutions. Maintain the buy rating.

Key points to support ratings

Q3 Revenue grew rapidly month-on-month, and R&D investment continued to increase. The 2023Q3 achieved revenue of 129 million yuan (+30.39%, +22.86% month-on-month), net profit of 0.28 million yuan (-15.36% year-on-year, +47.37%), and net profit of 27 million yuan (-18.35%, +58.82% month-on-month). Revenue achieved rapid month-on-month growth, and the year-on-year decline on the profit side was mainly due to a rapid increase in R&D expenses. The R&D cost rate for the first three quarters of 2023 was 57.05% (+12.65pct).

Purchase 43% of Yiruixin Electronics's shares to improve the DFT business layout. On September 26, it was announced that the company plans to use 34.78 million yuan of its own capital to transfer 43% of the shares held by Meng Fanjin, the actual controller of Yiruixin. After this investment is completed, the company will control a total of 62% of Erixin's shares, and Eruixin will become a holding subsidiary of the company and be included in the scope of the company's consolidated statement. Yiruixin focuses on integrated circuit testability design (DFT) technology services and product development. Its solutions can collaborate and complement the company's yield improvement system, open up the data chain, improve the company's overall yield improvement solution, and provide a more complete solution for design companies and fabs. From January to August 2023, Yiruixin obtained operating income of 4.21 million yuan, and net profit after excluding equity payments was 980,000 yuan. We believe this acquisition is an important part of the company's DFT business layout and is expected to have a synergistic effect on the customer and technology levels.

The product line accelerates iterative expansion, and software and hardware collaborate to open a new growth curve. (1) An efficient Process Control Monitor (PCM) program has been introduced to open up an integrated platform for design, testing and analysis tools. Currently, the program has been verified and optimized in many production lines, and some production lines have entered application delivery. (2) Expand the Design for Manufacturability (DFM) series of EDA software and independently developed CMPEXPLORER, a modeling tool for chemical mechanical polishing processes. The software establishes a CMP model based on various test structural thickness and surface topography data and CMP process parameters after the CMP process. Currently, the software has been tested and introduced by several leading domestic fab manufacturers. (3) Continuously expand the layout of semiconductor data analysis and management systems (DATAEXP series products).

valuations

Maintaining net profit of 2.09, 3.44, and 559 million yuan from 2023 to 2025, corresponding to EPS forecasts of 1.04 yuan, 1.72 yuan and 2.79 yuan, corresponding to PE, 83/50/31 times, respectively. The company is deeply involved in the field of yield improvement, and has a full chain layout for test chip design, EDA, WAT electrical testing and data analysis, and the collaborative advantages of software and hardware continue to be reflected. Maintain the buy rating.

The main risks faced by ratings

New product promotions fell short of expectations; market competition intensified.