Revenue remained high in 2023, new orders were sufficient, and 1Q revenue and profitability continued to improve

North China Huachuang released its 2023 performance report and quarterly report forecast. In 2023, it achieved operating revenue of 22.079 billion yuan, an increase of 50.32%; net profit to mother was 3,899 billion yuan, an increase of 65.73% over the previous year; the market share of the company's semiconductor equipment business increased steadily, and total operating revenue continued to grow. In 2023, the company signed more than 30 billion yuan of new orders, of which the integrated circuit sector accounts for more than 70%. The company achieved operating income of 5.42 billion yuan to 6.24 billion yuan in the first quarter, up 40.01%-61.19% year on year; net profit to mother was 1.04 billion yuan to 1.2 billion yuan, up 75.77%-102.81% year on year. We are optimistic that the capital expenditure of local Chinese wafer manufacturers will maintain high intensity in 2024 and that the domestic replacement process of semiconductor equipment will accelerate. We maintain our 24/25 revenue forecast of 315/43.9 billion yuan, are optimistic about the company's platform-based layout, give the company 6.65 times PS (6.48 times the industry average) in 2024, maintain a target price of 395.39 yuan and a purchase rating.

The company's quarterly performance is high, and the scale effect is prominent. Profitability continues to improve. North Huachuang expects to achieve operating income of 5.42 billion yuan to 6.24 billion yuan in the first quarter of 2024, an increase of 40.01%-61.19%; net profit to the mother of 1.04 billion yuan, an increase of 75.77%-102.81%; after deducting non-net profit of 990 million yuan to 1.14 billion yuan, an increase of 85.46%-113.56%; the company is used in etching, film deposition, cleaning and furnace tube processes in the field of integrated circuits The equipment market share has been rising steadily, and revenue has increased steadily over the same period last year. As the scale of the company's revenue continues to expand, the scale effect gradually became apparent, and the cost ratio declined steadily, so that net profit attributable to shareholders of listed companies maintained year-on-year growth. Based on the company's median forecast, the company's net interest rate for the first quarter of '24 was 19.21%, +3.93pct year-on-year.

Optimistic about the localization of semiconductor equipment for a long time, the company's platform-based layout is expected to continue to benefit more than 30 billion yuan in new orders signed by the company in 2023, of which the integrated circuit sector accounts for more than 70%. Looking ahead to 2024, we expect that the capital expenditure of local Chinese wafer manufacturers will maintain high intensity and that the domestic replacement process of semiconductor equipment will accelerate, and the performance of domestic semiconductor equipment manufacturers is expected to continue to increase. We are optimistic about 1) the company's various equipment such as etching machines, PVD, CVD, oxidation furnaces, cleaning machines, etc., to fully benefit from the huge demand brought about by localization, and the customer penetration rate has increased; 2) the company's multiple product lines, such as compound semiconductors and advanced packaging, are working together. As the company's two new plants are built, the company's own supply capacity has increased; 3) the company's platform-based layout is highly competitive and leading the way in advanced process equipment.

Maintain the purchase and target price of $395.39

The company has sufficient orders in hand, and we maintain our 24/25 revenue forecast of 315/43.9 billion yuan, corresponding to the 24/25 net profit forecast of 59.72/8.094 billion yuan. The equipment sector recently recovered in stock prices. The industry average is 6.48x2024 PS. We are optimistic about the company's platform-based layout, giving 6.65x2024 PS, maintaining a target price of 395.39 yuan and a purchase rating.

Risk warning: The risk that global semiconductor equipment will enter a downward cycle; the risk that equipment development falls short of expectations.