Profits in the first three quarters of 2023 are under pressure in the short term, and the company's high-end testing machines are expected to lead domestic replacement
In the first three quarters of 2023, the company's revenue was 1.299 billion yuan, the year-on-year net profit was 1.33 million yuan, -99.59% year-on-year, and net profit without return to mother was 107 million yuan, -140.83% year-on-year. We believe that the pressure on the company's profits is mainly due to the decline in industry demand and the pace of the company's revenue recognition. The company's contract debt for the first three quarters was 13.78 million yuan, +100.89% over the same period last year, and the on-hand order index was relatively healthy. We expect the company's 23-25 net profit to be 0.6/6.2 billion yuan, corresponding to PE 424/38/26X. Comparable company PE in 24 years is 47 times higher. Considering that the company has broad domestic replacement space in the field of semiconductor back-end SOC digital testing machines, and that the company's continuous research and development is expected to lead the domestic replacement of SOC digital testers, giving the company 54 times PE in 24 years, corresponding to a target price of 54.00 yuan, to maintain a “purchase.”
Demand for semiconductor back-end test equipment contracted in 2023, and is expected to recover in 2024-2025. According to a report published by SEMI at SEMICON Japan 2023, the global semiconductor equipment market will reach 100 billion US dollars in 2023, a decrease of 6.1% over the previous year. SEMI expects semiconductor equipment to resume growth in 2024, and sales are expected to reach a new high of $124 billion in 2025. In terms of back-end testing and packaging equipment, SEMI expects semiconductor back-end test equipment market sales to shrink by 15.9% to $6.3 billion in 2023, and packaging equipment sales are expected to drop 31% to $4 billion.
The back-end test equipment and packaging equipment sectors are expected to grow by 13.9% and 24.3% respectively in 2024, with the 24-year back-end test equipment market reaching US$7.2 billion. In 2025, SMEI expects global back-end testing equipment sales to grow 17% and packaging equipment sales to grow 20%.
There is a broad space for domestic replacement of semiconductor testing machines, and the company is expected to lead the back-end testing of domestic replacement semiconductors as an important part of product yield and cost management. Backstage testing equipment includes testing machines, probe stations, sorters, etc. According to SEMI data, testing machines accounted for 63% of the global investment in back-end testing equipment in 2020, and SoC/storage/digital-analog mixed/RF testing machines accounted for about 60%/21%/15%/4% of the global testing machine market. We estimate that the global semiconductor testing machine market will reach 4.5 billion US dollars in 2024, and the mainland China market is nearly 1.2 billion US dollars, of which the SOC testing machine market will exceed 700 million US dollars. The company successfully developed a SOC testing machine in 2021. It now covers various types of chips such as analog, digital-analog hybrid, SOC, power, and RF, which is expected to lead domestic replacement.
R&D investment continues to be high. Since 2018, semiconductor back-end equipment platform companies have maintained a R&D cost rate of more than 20%. The company's R&D rate in the first three quarters of 2023 was 43.48%. Continued high R&D helped the company continue to break through in high-end testing machines, and the layout of various products was smooth. In addition to high-end testing machines, the company's products cover various types of back-end equipment such as sorters, probe stations, AOI, etc. The company's gross profit margin for the first three quarters of 2023 was 57.51%, +3.45pp year on year, 61.10% Q3 gross profit margin, +10.72pp/+6.13pp. We anticipate that as demand in the semiconductor equipment market picks up in 2024, the company is expected to grow more and less.
Risk warning: Semiconductor recovery is low, new product development falls short of expectations, and foreign technology restrictions risk.