The company's 2024Q1 revenue continued to grow year-on-year, maintaining the “buy” rating. The company released its 2024 quarterly report. The company achieved revenue of 1,605 billion yuan, YoY +31.23%, QoQ -27.77%; realized net profit to mother of 249 million yuan, YoY -9.53%, QoQ -60.21%; net profit margin of 263 million yuan, YoY +15.4%, QoQ -42.56%; gross profit margin 44.94%, YoY-0.88pcts; net profit margin 15.52% YOY-12.65pcts. We maintain the company's profit forecast for 2024-2026. The net profit for 2024/2025/2026 is estimated to be 20.92/27.73/36.25 billion yuan, EPS is 3.37/4.47/5.85 yuan, and the current stock price corresponds to PE 40/30.2/23.1 times. As a leading domestic etching company, the company is expanding rapidly towards a platform-based company and maintaining a “buy” rating.

Non-recurring profit and loss affected net profit, and strengthened R&D investment and continued expansion of the new product company's 2024Q1 net profit was about -9.53% year-on-year, mainly due to 2024Q1 revenue and gross profit growth. The non-recurring profit and loss was a loss of 0.14 million yuan, or about -61 million yuan year on year; changes in non-recurring profit and loss were mainly due to:

(1) Due to the fall in secondary market stock prices in the first quarter of 2024, the fair value of the company's equity investment in the current period decreased by about 40.77 million yuan, a year-on-year decrease of -41 million yuan; (2) Government subsidy income included in non-recurring profit and loss in the current period was 0.14 billion yuan, a decrease of about 23 million yuan over the previous year. 2024Q1 deducted non-net interest rate of -2.25pcts month-on-month, mainly due to 2024Q1 R&D expenses of 360 million yuan, +62.43% year-on-year. Based on strong customer demand and confidence in the market, the company continues to step up R&D efforts and actively promote the development of various new products.

Shipments of etching equipment increased significantly. Verification of various products progressed smoothly until 2024Q1. The company's contract debt balance was 1,169 billion yuan, an increase of 51.51% over the beginning of the year. Mainly due to the significant increase in production and delivery volume of 2024Q1 etching equipment, the company received more delivery payments, which led to an increase in the balance of contract liabilities. In terms of etching equipment development: Many devices for the most critical etching processes in logic and memory chip manufacturing have been verified on customer production lines; wafer edge Bevel etching equipment has been developed and is about to be verified by customers; TSV silicon through-hole etching equipment is also increasingly being used in advanced packaging and MEMS device production.

Thin film deposition: A number of equipment products have entered the market, some of which have received repeated orders, and many other key thin film deposition equipment R&D projects are progressing smoothly.

Risk warning: Fab production expansion falls short of expectations; new product verification falls short of expectations; market competition pattern intensifies.