Fundamentals are still at the starting point of recovery. Advanced AI packaging is still the main enduring line, maintaining a “buy” rating
Considering cost rigidity, the company is expected to add an additional operating expenses of HK$250 million in 2024. We have lowered our 2024-2025 net profit forecast from HK$20/2.5 billion to HK$11/20 billion, and added a net profit forecast of HK$1.9 billion for 2026, corresponding year-on-year growth rates of 57%/81%/-9%, EPS of 2.7/4.9/4.5, respectively. The current stock price of HK$91.95 corresponds to PE 35.2/19.4/21.3 times 2024 to 2026, respectively. Considering that the company is still at the beginning of fundamental recovery, AI is still the main line of long-term investment, and the company's advanced packaging TCB and HB equipment is gradually opening up a new customer situation and maintaining a “buy” rating.
New orders for 2024Q1 have picked up seasonally, and the strength of the recovery for the full year of 2024 remains to be seen
2023Q4's revenue was 435 million US dollars, down 2% from the previous month, and fell within the guidance range of 39-450 million US dollars. Gross margin increased 8.12 percentage points month-on-month to 42.3% in 2023Q4, as the impact of inventory provisions subsided and product structure improvements. Among them, the semiconductor solutions division was driven by TCB, Optoelectronics, etc., and revenue increased slightly by 1.2% month-on-month to 204 million US dollars, but due to seasonal factors, new orders fell 6.2% month-on-month; while the SMT business declined 4.7% month-on-month to 232 million US dollars due to the slowdown in 2023H2 industrial and automotive terminal market performance, and new orders fell 8.7% month-on-month. Based on the overall decline in new orders in 2023Q4, the company's guidelines expect 2024Q1 revenue to fall 1%-15% in the revenue range of 37-430 million US dollars. Due to the low base of new orders in 2023Q4, the company indicates that new orders in 2024Q1 will increase seasonally by about 20% month-on-month. Among them, improvements in the semiconductor solutions segment are more obvious, corresponding to our expectation that 2024Q2 revenue will increase month-on-month. The pace of recovery throughout 2024 remains to be seen, and we expect the company's revenue to grow 10% year over year in 2024. As the impact of inventory impairment subsides and revenue scales improve, gross margin in 2024 is expected to increase year-on-year compared to 2023.
The AI wave accelerates the penetration of advanced packaging, and the company's TCB and HB customers are expanding smoothly
Benefiting from the logical requirements required for artificial intelligence, the company received a TCB order for C2S from a leading foundry in 2023Q3 and 2023Q4, and will continue to cooperate in the C2W process; in the future, the company will also cooperate with high-broadband memory customers to obtain TCB orders. The company will deliver two HB orders in 2024H2 and is expected to receive more orders. We expect the company's advanced packaging business to maintain high growth.
Risk warning: Research and development of advanced packaging equipment has been delayed, economic recovery falls short of expectations, and demand upgrades fall short of expectations.