Changchuan Technology announced its 2023 performance forecast. The company expects to achieve net profit of 3700-55 million yuan for the full year of 2023, a year-on-year decrease of 92.0% to 88.1%, deducted net profit of 8300-65 million yuan, and a year-on-year decrease of 121.0% to 116.5%. Due to the cyclicality of the semiconductor industry and the global macro environment, demand from downstream customers has slowed down, leading to a year-on-year decline in the company's revenue. Despite this, the company continued to increase investment in high-end testing equipment research and development and explore the high-end market. The company spent 530 million yuan on R&D in the first three quarters of 2023, an increase of 16.8% over the previous year, and the R&D expenses rate reached 43.5%, thus putting pressure on the profit side. At the bottom of the cycle, the company continued to invest heavily in R&D to ensure long-term development.
Continued to vigorously invest in high-end R&D, and the value of stand-alone sales machines has increased significantly. As of June 30, 2023, Changchuan Technology has 708 authorized patents at home and abroad (including 336 inventions) and 60 software copyrights. Compared to the end of 2022, the number of authorized patents increased by 103 (including 33 inventions), and software copyrights increased by 5. Since its establishment, the company has always been committed to independent R&D and innovation of integrated circuit testing equipment. As of the first half of 2023, R&D personnel accounted for more than 54% of the company's total number of employees, and the core technicians have extensive experience in the semiconductor testing equipment industry.
On the product side, on the basis of maintaining its market position in existing pan-analog equipment, the company focused on developing related sealing and testing equipment such as probe stands, high-end testing machine products, three-temperature sorters, AOI optical inspection equipment, etc., broadened the product line, and actively developed the middle and high-end markets. Based on the company's total revenue/number of sales machines, the company's ASP was about 460,000 yuan in 2018, and has increased to 1.56 million yuan by 2022.
Advanced packaging is driving up testing demand and new opportunities for domestic equipment manufacturers. Terminal applications such as AI, HPC, intelligent driving, and MR bring demand for chips such as high computing power, high bandwidth, low latency, low power consumption, and low cost. SK Hynix, Samsung, and Micron are speeding up iteration and expansion of HBM production, driving the rapid expansion of advanced packaging production capacity at home and abroad. Advanced packaging costs are high. Taking HBM as an example, KGSD (Known Good Stacked Die) testing is required, driving the increase in testing demand. In the context of trade frictions, the willingness of fabs, IDM, and test manufacturers to verify and purchase domestic equipment has increased significantly. On the one hand, domestic equipment manufacturers are benefiting from a continuous increase in the share of localization demand. On the other hand, advanced packaging also needs to upgrade all aspects of equipment, driving an increase in machine value and market size.
Changchuan Technology: Endogenous epitaxial builds test equipment platform supplier. In terms of extension, the company completed the acquisition of STI in 2019, and plans to acquire 97.6687% of Changyi Technology's shares to 100% ownership in 2022 to improve the layout of the testing and inspection field. We expect the company's revenue in 2023-2025 to be 20.0/35.2/4.76 billion yuan, and net profit to mother of 0.5/6.4/940 million yuan, maintaining the “Highly Recommended” rating.
Risk warning: New product development falls short of expectations, downstream demand falls short of expectations, industry competition intensifies