Matters:
Su Test released its 2024 quarterly report: In 2024Q1, the company achieved revenue of 442 million yuan, a year-on-year increase of 1.03%, and realized net profit of 42 million yuan, a year-on-year decrease of 4.86%; net profit without return to mother was 40 million yuan, a year-on-year decrease of 1.81%.
Commentary:
Results are in line with expectations, and a slight decline in gross margin is expected to be structurally affected. In 2024Q1, the company achieved revenue of 442 million yuan, a year-on-year increase of 1.03%, achieved net profit of 42 million yuan, a year-on-year decrease of 4.86%, and realized net profit of 40 million yuan without return to mother, a year-on-year decrease of 1.81%, in line with market expectations. The Q1 equipment sector in 2023 had a high base due to delays in the previous period. In 2024, the company's gross margin/net margin was 42.47%/10.21%, respectively, and -0.99pct/-1.57pct, respectively. The growth rate of the integrated circuit sector is expected to be relatively fast. Early equipment investment in the integrated circuit sector is currently in a climbing period, and gross margin is expected to increase quarterly as revenue grows; the company's Q1 sales/management/R&D/finance expense ratios for 2024 were 8.11%/13.17%/7.93%/1.93%, respectively, +1.32pct/- 0.19pct/+0.97pct/+0.10pct, the cost rate is basically stable.
There are disturbing factors in 2023, and I am optimistic that the improved demand in 2024 will release the company's production capacity. In 2023, due to the phased impact of testing requirements in special industries and the semiconductor sector and the extension of settlement cycles, the combination of factors of resilience on the cost side of physical inspection had a phased impact on the company's profit performance.
We believe that the linkage between the company's equipment and services forms a high-tech barrier. The company's laboratory layout is improving the layout of special laboratories, preparing to build a Thai laboratory, and continuously broadening the application of service capabilities in aerospace, communications, etc.; we expect the gradual recovery of demand in the military, electronics and electrical industries in 2024, and an increase in demand for new energy and aerospace, which will drive the release of production capacity invested in the company's fund-raising projects and integrated circuit equipment, and the subsequent growth rate of performance is expected to improve marginally.
Investment advice: We expect revenue for 2024-2026 to be 25.17/30.22/3.596 billion yuan, respectively, with a year-on-year growth rate of +18.9%/+20.1%/+19.0%; corresponding net profit to mother for 2024-2026 is 3.86/4.88/ 603 million yuan, up 22.8%/26.6%/23.5% year-on-year. We refer to the average valuation of comparable companies and give the company 25XPE in 2024, with a target price of about 19 yuan. Maintain a “strong” rating.
Risk warning: Capacity expansion is falling short of expectations; competition for testing services is intensifying; downstream sentiment is declining.