Matters:
On April 24, 2024, the company released the 2023 Annual Report and 2024 Quarterly Report:
1) 2023: The company achieved operating income of 891 million yuan, +74.95% year on year; gross profit margin of 52.62%, +3.95pct year on year; net profit attributable to mother/after deduction of 140/32 million yuan, +1072.38%/+136.08% year on year;
2) 2024Q1: The company achieved operating income of 236 million yuan, +45.60% year over year; gross profit margin of 54.34%, -0.92pct year on year; net profit attributable to mother/after deduction was 0.34/0.08 billion yuan, +9.16%/+1084.30% YoY.
Commentary:
Revenue continues to grow at a high rate, and the release of new products is expected to help maintain a high trend in the company's performance. The domestic replacement process for semiconductor equipment has been accelerated, and the company continues to iterate product performance, broaden the product matrix, and achieve rapid growth in performance. By business, the company achieved inspection equipment revenue of 654 million yuan in 2023, +70.15% year-on-year, gross profit margin of 57.17%, and a year-on-year +4.54pct; measurement equipment revenue of 222 million yuan, +88.56% year-on-year, gross profit margin of 38.79%, and +2.95pct year-on-year. Due to the scale effect, the company's profitability increased significantly. In 2023, the company's net profit margin to mother reached 15.75%, +13.45 pct compared to the previous year. 2024Q1's revenue was +45.60% year-on-year to $236 million, and net profit attributable to mother was partly affected by the decline in other earnings. In the future, the company's performance is expected to maintain rapid growth as downstream fabs begin a new production expansion cycle and the company's new products are released one after another.
Industry cycle recovery and terminal innovation drive the expansion of production in fabs, and the measurement equipment market is expected to continue to grow at a high rate.
The recovery of the industry cycle, combined with continuous innovation in terminal applications such as AI and new energy vehicles, is expected to drive the capital expenditure of fab factories back to a growth trajectory and boost demand in the Chinese conductor equipment market. At the same time, as the semiconductor industry chain evolves to advanced manufacturing processes, the usage and demand for process quality control equipment continues to increase, and the semiconductor testing and measurement equipment market is expected to rise sharply in volume and price. In terms of the competitive landscape, the current market is still dominated by overseas manufacturers such as KLA and applied materials. In recent years, domestic semiconductor testing and measurement manufacturers Zhongke Fei Test and Shanghai Precision Measurement are catching up at an accelerated pace, but the overall market share is still relatively small, and there is still plenty of room for improvement in the future.
The company insists on independent research and development to build core barriers, and the platform-based layout of measurement and testing equipment is progressing smoothly. Since its establishment, the company has maintained a high level of R&D investment. At present, it has successfully deployed nine series of equipment and three series of software products. Among them, six series of equipment have been mass-produced and applied by leading domestic customers. The technical indicators fully meet the process needs of mainstream domestic customers, and the market share of the company's products has been growing steadily and rapidly; in addition, the three series of equipment have completed prototype research and development. Among them, brightfield nanographic wafer defect detection equipment and optical key size measurement equipment have been shipped to customers to carry out production line process verification and application development. Verification and application development are in progress, and customer on-site evaluation intentions have been reached with many leading domestic customers. The future release of various products is expected to drive the company's performance to continue to improve.
Investment advice: Demand recovery combined with technological innovation is expected to drive downstream fabs to actively expand production. Domestic replacement space for measurement and testing equipment is vast, and the company is expected to benefit deeply as a leading domestic manufacturer of quantitative testing equipment. We maintained the company's revenue forecast for 2024-2025 at $1,320 million and added an additional revenue forecast of $2,338 billion for 2026. Referring to comparable company valuations and the growth of the company's performance, the company was given 0.55 times PSG in 2024, with a corresponding target price of 84.1 yuan, maintaining a “strong” rating.
Risk warning: Changes in the international trade situation; downstream fab production expansion falls short of expectations; technology iteration or new product development falls short of expectations; industry competition intensifies.