Incidents:
1. The company released its 2023 annual results report. During the reporting period, it achieved revenue of 22.079 billion yuan, an increase of 50.32% over the previous year; realized net profit attributable to owners of the parent company of 3,899 billion yuan, an increase of 65.73% over the previous year; and realized net profit deducted from non-mother of 3,581 billion yuan, an increase of 70.05% over the previous year.
2. The company released a performance forecast for the first quarter of 2024, with estimated revenue of 5.42 billion yuan to 6.24 billion yuan, an increase of 40.01% to 61.19% over the same period last year; net profit attributable to owners of the parent company is estimated to be 1.04 billion yuan to 1.2 billion yuan, an increase of 75.77% to 102.81% over the same period last year; net profit without return to mother is 990 million yuan to 1.14 billion yuan, an increase of 85.46% to 113.56% over the same period last year.
The main business continues to gain strength, and the scale effect is gradually showing:
The company's revenue in 2023 increased 50.32% year on year, mainly due to the good development of the company's main business during the reporting period, rapid progress in domestic replacement of semiconductor equipment, market recognition of dozens of core process equipment such as etching, film deposition, cleaning and furnace tubes used in the field of integrated circuits, a significant increase in process coverage and market share, and a significant year-on-year increase in product sales. In terms of profitability, the company's net interest rate was 17.7% in '23. Profitability continued to increase, and the scale effect gradually became prominent. In terms of orders, the company signed more than 30 billion yuan of new orders in 2023, of which the integrated circuit sector accounted for more than 70%, and new orders continued the high growth trend.
24Q1 revenue is expected to continue to increase year over year, and net interest rate will increase further year over year:
In the first quarter of 2024, the company expects both revenue and net profit to be increased significantly year-on-year. Based on the median value of revenue and net profit of 5.83 billion yuan and 1.12 billion yuan, the net interest rate is 19.2%, an increase of 3.2 pct over the previous year, and profitability continues to increase.
The recovery of the global semiconductor equipment market is compounded by domestic substitution, and the company is expected to continue to benefit:
Recently, according to SEMI data, due to the recovery of the memory market and strong demand for high-performance computing and automotive applications, global spending on 300mm fab equipment for front-end facilities is estimated to exceed 100 billion US dollars for the first time in 2025, and will reach a record high of 137 billion US dollars by 2027. From a domestic perspective, mainland China is the world's largest semiconductor equipment market. The market size is expected to reach US$36.6 billion in 2023, an increase of 29% over the previous year. Currently, most domestic semiconductor equipment still depends on overseas. North Huachuang is a leading domestic semiconductor equipment leader, and is expected to continue to benefit from the recovery of the global semiconductor equipment market and the promotion of domestic substitution in the future.
Investment advice:
We expect the company's revenue from 2023 to 2025 to be 22.079 billion yuan, 29.887 billion yuan, and 39.707 billion yuan, respectively, and net profit to mother of 3.899 billion yuan, 5.717 billion yuan, and 7.659 billion yuan, respectively. Considering that the company's scale effect is gradually showing, production capacity has increased dramatically, and domestic semiconductor substitution has accelerated. The company was given a valuation of PE33.00X in 2024, corresponding to a target price of 355.74 yuan. Give it a “buy-A” investment rating.
Risk warning:
Downstream demand decline risk, market competition risk, product development falling short of expectations, customer development falling short of expectations.