Traditional packaging is still at the beginning of recovery, and AI advanced packaging is still the main line of sustainability. Maintaining the “buy” rating Although the traditional packaging business is not very prosperous in 2024, TCB equipment shipments are expected to be significantly higher than in 2023, and the value and profit margin of TCB equipment are significantly higher than those of the traditional packaging business, which is expected to drive an increase in overall net profit in 2024. We expect TCB equipment to continue to be rapidly deployed in 2025-2026. At the same time, the traditional packaging business boom will pick up and operating leverage will significantly drive improved profitability, which is expected to drive high net profit growth in 2025-2026. Considering the uncertain pace of recovery of traditional packaging and the combined impact of the trend of advanced packaging TCB equipment volume exceeding expectations, we lowered the 2024 net profit forecast from HK$1.1 billion to HK$1 billion, maintained the 2025 net profit forecast of HK$2 billion, and raised the 2026 net profit forecast from HK$1.9 billion to HK$2.7 billion, corresponding to a year-on-year growth rate of 35.8%/109.6%/31.7%. The current stock price of HK$10.23 corresponds to 2024-2026 PE 43.4/ 20.7/15.7 times PE, maintaining a “buy” rating.
Advanced packaging is expected to drive a month-on-month improvement in 2024Q2 revenue. The recovery of traditional packaging remains to be observed at 2024Q1 revenue of 401 million US dollars, down 8% from the previous month, falling within the guidance range of 3.7 to 430 million US dollars. Among them, the semiconductor solutions segment declined 14% month-on-month, and the SMT business declined 3% month-on-month. 2024Q1 added orders of 409 million US dollars, up 17% month-on-month. The company guides 2024Q2 revenue in the revenue range of 38-40 million US dollars, with a median increase of 2.2% month-on-month. Our analysis was mainly driven by advanced packaging, and the recovery visibility of traditional packaging is still low, and the pace of recovery throughout 2024 remains to be seen.
The company's TCB equipment has a leading edge in technology. Advances in logic and storage customers exceed expectations, and TCB devices, which the company excels at, are expected to usher in a rapid deployment trend. Whether it is the logic customer's C2W process or the large-scale application of TCB for storage customers 12hi HBM, the prospects are more clear. (1) Logic customer: Along with the improvement of chip performance, the company expects that future C2W processes will also use TCB devices. The C2W process requires a higher number of TCBs, and is corresponding to higher value due to higher accuracy control requirements. (2) Storage customers:
Since HBM is developing from 8hi to 12hi and 16hi, corresponding to increased I/O density and thinner chips, traditional MR solutions face bottlenecks and are expected to migrate to TCB devices. The company's TCB for 12hi HBM is already being produced and delivered. With the large-scale application of 12hi HBM, it is expected that TCB equipment will continue to be deployed in 2025.
Risk warning: Research and development of advanced packaging equipment has been delayed, economic recovery falls short of expectations, and demand upgrades fall short of expectations.