Main points of investment

The third quarterly report of 2023: the performance exceeded expectations, benefited from the high prosperity of TOPCon expansion, and the performance exceeded expectations: the revenue in the first three quarters of 2023 was 2.91 billion yuan, an increase of 24.4 percent over the same period last year; and the net profit of return to the mother was 680 million yuan, an increase of 43.5 percent over the same period last year. The revenue of Q3 alone was 1.14 billion yuan, up 18% from the same period last year, and the net profit from home was 310 million yuan, up 38% from the same period last year.

The second half of the year will enter the accelerated production period of TOPCon cells, the company will fully benefit as a domestic photovoltaic vacuum pump leader.

2) improved profitability: gross profit in the first three quarters was 40.1%, year-on-year + 4.2 PCT; net profit rate was 23.4%, year-on-year + 3.1pct. Single Q3 quarter, gross margin 42.7%, year-on-year + 4.5 PCT; net profit 27.7%, year-on-year + 4pct. The core is expected to benefit from the increase in revenue share of photovoltaic vacuum pump products and the company's accelerated breakthroughs in the photovoltaic vacuum pump field.

3) orders: at the end of the third quarter, the contract debt was 290 million yuan, an increase of 186.5% over the same period last year; inventory was 1.13 billion yuan, an increase of 19.1% over the same period last year. It is expected that the second half of the year will enter the delivery acceleration period. 2023 is the year of accelerating the expansion of photovoltaic TOPCon cells, and the company will fully benefit from the domestic photovoltaic vacuum pump leader.

4) R & D: 151 million yuan in the first three quarters, an increase of 27% over the same period last year, accounting for 5.2% of revenue, plus photovoltaic + semiconductor vacuum pump.

Hanzhong Seiki: compressor leader, photovoltaic + semiconductor vacuum pump open growth second pole 1) photovoltaic vacuum pump: company wafer vacuum pump market share of 70-80%, bound downstream core long crystal furnace equipment factory (Jingsheng, Jiejia, microconductor, etc.) + silicon wafer / battery factory (Longji, Central, Tongwei, Tianhe, Jingao, etc.). The company has shipped batches in the TOPCon field of battery vacuum pumps, and has benefited from the technical iteration of the industry in HJT customer testing.

2) Semiconductor vacuum pump: at present, European, American and Japanese brands occupy about 90% of the whole market, and there is a lot of room for import substitution. The company is the leader of screw vacuum pump and distributes multi-stage Lu-style and rotary vane pumps at the same time. (1) Chip factory customers: it has been approved by some domestic chip manufacturers and has begun to provide vacuum pump products in bulk, including new production expansion projects and replacement of old vacuum pumps of imported brands.

(2) equipment factory customers: it has started cooperation with a number of semiconductor equipment enterprises, and domestic vacuum pumps are expected to replace imported brands.

3) Compressor: the company is the leader of domestic compressor equipment, covering commercial central air conditioning compressors, refrigerated compressors, heat pump compressors and air compressors downstream, benefiting from macroeconomic recovery.

Profit forecast and valuation

It is estimated that the company's net return profit from 2023 to 2025 will reach RMB 1.07 billion, an increase of 40% over the same period last year, 19% and 16%, corresponding to the PE of 13-11-9. Maintain a "buy" rating.

Risk hint: the downstream expansion of photovoltaic is not as expected; the progress of semiconductor equipment research and development is lower than expected.