Third-party leading manufacturer, the product matrix continues to be rich: Since its establishment in 1997, the company has relied on both endogenous and epitaxial models to continuously develop and expand its strength. Currently, the company has 7 production bases and multiple product lines. The company is an integrated circuit packaging testing service provider, providing one-stop service for design simulation and package testing for customers around the world. The company's products, technology and services cover a full range of fields such as artificial intelligence, high-performance computing, big data storage, display drivers, 5G and other network communications, information terminals, consumer terminals, the Internet of Things, automotive electronics, and industrial control.
Revenue has been rising steadily, and profitability has improved over the long term: benefiting from close cooperation with the major international manufacturer AMD, continuous technological innovation and product structure optimization, the company's revenue climbed from 7.223 billion yuan to 21.499 billion yuan in 2018-2022, with a CAGR of 31.24%. 2023Q3's performance continued to increase 3.84% year over year against the backdrop of a declining global semiconductor boom. The company's net profit to mother fluctuated greatly, but EBITDA continued to increase from 1,256 billion yuan to 4,075 billion yuan in 2018-2022, proving the steady increase in the company's profitability.
The slight year-on-year decline in 2023Q3 EBITDA was mainly affected by exchange factors, and long-term logic was not disturbed.
The semiconductor industry is recovering at a bottom, and advanced packaging is contributing to market growth: inventory declines in many semiconductor segments were obvious, smartphones and PCs took the lead in recovering, and memory chips stopped falling and rebounded, all indicating that the semiconductor industry is about to recover. The value of the packaging and testing process accounts for about 30% of the semiconductor industry chain. Among them, the penetration rate of advanced packaging continues to increase driven by strong demand for computing power. The global advanced packaging market is expected to grow from US$35 billion to US$48.2 billion in 2021-2026. The CAGR will exceed the industry's compound annual growth rate (4.34%) by 6.61%, and the market share will also exceed 50% for the first time in 2025, reaching 50.37%. China's advanced packaging development is at a relatively early stage, and TSMC's CoWoS production capacity is tight. OSAT manufacturers in China that have advanced packaging technology reserves and capabilities and can accept TSMC's spillover orders will have a first-mover advantage.
Combined with AMD sharing AI dividends, high-quality customer resources guarantee the steady development of the company: Recently, AMD has successively released various chips such as the MI 300, Ryzen 8040 series, and Ryzen 800G series, to go head-to-head with Nvidia and Intel in the fields of data centers, AI PCs, etc., and AMD's performance will fully benefit from the development of the AI industry. The company acquired 85% of AMD's Suzhou and Penang test factories in 2016 and launched a “cooperation+joint venture” model with AMD. Currently, the company is an important AMD packaging and testing foundry, accounting for more than 80% of its total orders, and will share AI dividends with AMD. The sealing and testing industry has the characteristics of strong customer stickiness and rare replacement of sealing and testing suppliers. The company has successively obtained technology licenses from Fujitsu, Casio, and AMD, and has been highly recognized by leading companies such as AMD, MTK, Ziguang Zhanrui, Zhuosheng Wei, ST, and TI. The customer resources cover international giants and leading companies in various segments, providing a strong guarantee for the company's stable and continuous development.
Investment advice: We expect the company's 2023-2025 revenue to be 236.87/283.82/32,723 billion yuan, respectively, up 10.54%/19.82%/15.3% year on year, net profit to mother of 1.43/1,063/1.4 billion yuan, up -71.59%/645.36%/31.71% year on year, EPS 0.09/0.70/0.92, respectively. The current stock price corresponds to 2023-2025 PE is 231.57x/31.07x/23.59x , which gave a “Recommended” rating for the first time.
Risk warning: Risk of semiconductor industry recovery falling short of expectations; risk of intensifying international trade frictions; risk of artificial intelligence development falling short of expectations; risk of technology iteration and product certification falling short of expectations.