Investment summary
Incident Overview
On the evening of March 30, the company disclosed its 2023 annual report. In 2023, the company's revenue and net profit to mother were 6.61 billion yuan (+7.54%/+6.33%), respectively, of which semiconductor precision processing product revenue reached 342 million yuan, +6.63% year over year.
Analysis and judgment
The company has strong competitiveness and leading edge in the field of semiconductor packaging and testing equipment, and continues to promote the localization process of cutting machines and thinning machines. There is still plenty of room for improvement in the localization rate of advanced packaging thinners and scribers. Currently, the dicer market is dominated by Japan's DISCO, Tokyo Seimitsu, and ADT, with a total market share of nearly 95%; the company has become the top three semiconductor cutting and cutting equipment companies in the world through overseas mergers and acquisitions, and the domesticated scribing machines launched by Guangli Ruihong, a wholly-owned subsidiary of the company, have achieved mass sales. In the field of thinners, DISCO's equipment is most widely used, and Tokyo Seimitsu also accounts for a certain share; the company's thinning machine was launched in June 2023 and is in the verification stage. Furthermore, we believe that localization of core components is essential to achieve autonomous control of semiconductor thinning and cutting equipment — the company's localized cutting spindles have been mass-produced, localized soft knives are being produced in small batches, and some models of products have been verified and sold by clients.
We expect the semiconductor packaging equipment boom to pick up, the company's orders to grow rapidly, or jointly drive the company's performance growth. According to SEMI, due to macroeconomic environmental challenges and weak semiconductor demand, back-end equipment sales began to decline in '22 and are expected to continue to decline in '23.
However, SEMI expects the market to grow 24.06% year over year in '24 and grow a further 20.20% in '25. In addition, the company has received batch orders from leading test manufacturers and emerging customer groups in the field of new technology in '23, and new orders are growing rapidly. We believe that the contract debt at the end of '23 increased significantly compared to the end of the third quarter, which may confirm the growth of orders.
The company continues to be deeply involved in the field of industrial safety production monitoring, has achieved many results in the coal industry, and has become a leader in industrial development in industry segments. We believe that in the context of the industry of intelligent mine construction, safe production, and supply-side reforms to reduce staff and increase efficiency, the company's IoT safety production monitoring business is expected to achieve steady growth.
Investment advice
Maintain a “buy” rating. We adjusted the company's net profit for 2024-2026 to 1.41 billion yuan, respectively, with a year-on-year growth rate of +50.36%/+35.30%/+14.57%. The corresponding EPS was 0.30/0.40/0.46 yuan, respectively, and the corresponding PE valuation was 58/43/37 times, respectively.
Risk warning
R&D progress falls short of expectations, demand for semiconductor equipment falls short of expectations, and the risk of international trade friction.