The company's recent situation
The company issued an announcement on the “Action Plan for Promoting the Double Improvement of Quality and Return”. The main contents include: 1) Focus on the main business and become the world's leading provider of integrated circuit EDA software and wafer-level electrical testing equipment; 2) innovation-driven development to continuously enhance the company's core competitiveness; 3) attach great importance to shareholders' rights and strengthen return on investment; 4) continue to improve corporate governance and strengthen standardized operation; 5) adhere to corporate values as the core and improve the quality of information disclosure.
The quality of operations continues to improve, and shareholder returns may continue to increase. We believe that the announcement clearly shows confidence in the company's development in terms of both main business operations and shareholder returns. The company is a scarce target on the domestic EDA circuit, focusing on increasing semiconductor yield and continuing to expand the product matrix. In recent years, both revenue and profit have achieved rapid growth and attached great importance to shareholder returns. Since its launch in August 2022, it has completed a cash dividend of 80 million yuan, accounting for 65.4% of the net profit returned to mother for the year.
reviews
Software business: Looking ahead to 2024, data analysis platforms will achieve volume. In 2023, due to market competition factors and customer budgets, the release of the company's data analysis software was slower than expected. In recent years, the company has continued to invest in R&D to polish products in the data analysis platform business. The number of leading chip design companies and fabs participating in the trial has continued to increase. We believe that short-term market factors will be disrupted or gradually eliminated. In 2024, the company's data analysis software products are expected to be rapidly released with product strength and early accumulation.
Hardware business: There are plenty of orders in hand, and it is expected to continue to grow steadily in 2024. We expect the company's hardware delivery pace in 2023 to be basically in line with expectations, and the share of hardware revenue in 2023 may increase. As of 3Q23, the company's net inventory value is 332 million yuan. We judge that the company has plenty of orders for WAT testing machines. We are optimistic that the T4000 series WAT test equipment will continue to be released in 2024. At the same time, it is worth looking forward to the progress of the high-end T4100s series in terms of going overseas.
Profit forecasting and valuation
Considering that the development of data analysis software was slower than our expectations, we lowered the company's 2023/2024 revenue by 15.7%/21.3% to 485/725 million yuan, reduced 2023/2024 profit 19.1%/20.4% to $141/241 million, and introduced 2025 revenue/profit of 1,065/392 million yuan for the first time. The company's target price was lowered by 15.7% to 77.44 yuan (based on the 2026 SOTP valuation, 40x P/E for the software business and 20x P/E for the hardware business, discounted by 9.8% to 2024). The target price has 21.0% upside compared to the current price, and the current price corresponds to 53.0/32.6 times the 2024/2025 price-earnings ratio. Considering that the company is a leading manufacturer of EDA and WAT testing machines to improve yield, we are optimistic about the company's long-term development and maintain a superior industry rating.
risks
Fluctuations in the international situation and risk of industry fluctuations; hardware demand falls short of expectations due to declining downstream prosperity; data analysis software business falls short of expectations.