Core views:
2023Q1-3 performance maintained a high growth trend, and capacity expansion continued to guarantee growth potential. The company released its three-quarter report, achieving operating income of 1,072 million yuan (+27.89%) and net profit of 129 million yuan (YoY +49.97%) in the first three quarters; of these, revenue of 420 million yuan (+54.79%) and net profit to mother of 52 million yuan (+131.07% YoY) were achieved in the first three quarters. On October 20, the company announced that it formally signed a cooperation agreement with the Nanjing Jiangning Development Zone Management Committee to purchase 277,300 square meters of industrial land in Nanjing's Jiangning District for the construction of new high-end equipment manufacturing projects, which will promote the company's high-end equipment production capacity expansion and product expansion, 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: Strong advantages in semiconductor cleaning, domestic substitution and overseas expansion drive growth. The company is already leading domestic manufacturers and benchmarking against overseas leaders in terms of product strength and brand reputation, forming an oligopoly competition in the domestic market with CAMFIL and AAF international giants. In the future, the expansion of production capacity in the domestic market combined with domestic substitution dividends will bring about a broad increase in orders. At the same time, the company has accelerated its overseas expansion. It has obtained certification from leading overseas companies such as Intel and STMicroelectronics and international standards such as ISO and ASHRAE, and continues to send product samples, so 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 advice: The company's net profit from 2023 to 2025 is expected to be 1.73/2.51/327 million yuan, corresponding to the latest PE of 39/20/16. Referring to comparable companies and growth rates, a PE valuation of 35 times 2023 is given, corresponding to a reasonable value of 45.15 yuan/share, maintaining a “buy” rating.
Risk warning: orders fall short of expectations; overseas expansion falls short of expectations; fundraising projects fall short of expectations.