1Q24 results are in line with our expectations
1Q24's revenue was HK$3.14 billion (US$401 million), YoY -19.9%, QoQ -7.8%, in line with the company's previous guidelines; total new orders were HK$3.20 billion (US$409 million), YoY -9.8%, QoQ +17.0%; gross margin was 41.9%, YOY+145 bps, QoQ-40 bps; net profit of HK$177 million, YoY -43.7%, QoQ +134.5%. As of the end of 1Q24, the company had outstanding orders of HK$6.65 billion (US$849 million). The 1Q24 results were in line with our expectations. The company directed 2Q24 revenue to be between $380 million and $4.4 billion.
Development trends
SEMI equipment business: 1Q24, SEMI business revenue of HK$1,375 million (US$176 million), YoY -10.8%, QoQ -13.7%; additional orders of HK$1,556 million (US$119 million), YoY +3.5%, QoQ +25.1%; gross margin of 44.6%, YOY-46bps, QoQ+86bps.
SMT equipment business: 1Q24, SMT business revenue of HK$1,763 million (US$226 million), YoY -25.8%, QoQ -2.6%; additional orders of HK$1,644 million (US$210 million), YoY -19.5%, QoQ +10.1%; gross margin of 39.7%, YOY+233 bps, QoQ-123bps.
Traditional devices are still weak due to consumer electronics, and customers in mainland China are still on the sidelines. Equipment revenue from IC and device demand declined month-on-month, but there are still sporadic orders, mainly because consumer electronics inventories have reached a relatively reasonable level, demand for goods is not obvious, and major mainland Chinese customers are still on the sidelines. However, at present, it can be seen that orders for high-end mobile phones to CIS manufacturing equipment are still quite obvious in 1Q24.
Advanced packaging has blossomed at many points, and TCB devices have opened up new storage customers. According to the announcement, in 1Q24, the company's TCB products continued to receive orders from IDM and OSAT, and received orders from leading fabs in C2S (chip to substrate) to jointly develop new products with C2W (chip to wafer); HBM also received orders from two major logic customers.
Profit forecasting and valuation
The profit forecast for 2024 and 2025 remains unchanged, but it is still necessary to observe the recovery in market demand in the future. The current company valuation corresponds to 22.3 times 2024 P/E and 17 times 2025 P/E. Maintain an outperforming industry rating.
Maintaining a target price of HK$115, corresponding to 25 times the 2024 P/E and 19 times the 2025 P/E, there is 12% upside compared to the current stock price.
risks
Terminal demand is under pressure; advanced packaging orders have fallen short of expectations.