Event Overview: Company Releases 24Q1 Quarterly Report

Revenue for the quarter was 1,605 billion yuan, up 31% and 28%; net profit to mother was 249 million yuan, down 10% and 60%; net profit after deducting non-net profit of 263 million yuan, up 15% year on year and 43% year on year; gross profit margin was 44.94%, down 0.93 pcts and 0.88 pcts.

The 24Q1 company's etching equipment products and shipments increased significantly, driving a significant increase in contract liabilities and inventory balances: contract liabilities at the end of the quarter were 1,169 million yuan, an increase of 397 million yuan over the beginning of the period; inventory at the end of the quarter was 5.584 billion yuan, an increase of 1,324 billion yuan over the beginning of the period, mainly due to the balance of goods issued in inventory of 1,923 billion yuan, an increase of 1,055 billion yuan over the beginning of the period.

Etching Q1 grew rapidly. Investment profits and losses and high-strength R&D dragged down profit 24Q1 revenue growth of more than 30%, mainly due to etching equipment's revenue growth of more than 64% to 1,335 billion yuan during the quarter, and the revenue share increased from 66.55% in 23Q1 to 83.20%. In addition, due to fluctuations in market sentiment, MOCVD's revenue for the quarter was 38 million yuan, a decrease of 77%, and revenue from spare parts and services was 232 million yuan, down 4% from the same period.

Net profit attributable to mother fell 10% year on year during the quarter, mainly due to: 1) the fair value of shares held in listed companies decreased by 40.77 million yuan, a year-on-year decrease of 41 million yuan; 2) government subsidies decreased by 23 million yuan compared to the same period last year. Net profit after deducting non-return to mother increased 15% in the same quarter. The growth rate was less than the revenue growth rate. The main reason was that the company increased R&D efforts and customer verification. R&D expenses increased by 83 million yuan during the quarter, and sales and management expenses increased by 0.39 million yuan and 18 million yuan respectively. Total expenses increased by 140 million yuan during the period.

Etching volume, film equipment accelerates breakthroughs

[Accelerated localization] 1) High revenue growth rate: the growth rate of the etching business in 22-23 was 57%/49%, respectively, higher than the company's overall revenue growth rate of 53%/32% during the same period; 2) Fast growth of new orders: the growth rate of new etching orders reached 60% in 23; 3) New product iteration: ultra-high aspect ratio masks (≥ 40:1) and ultra-high aspect ratio media etching (≥ 60:1) solutions can be used in memory chip manufacturing; ICP launched two new VE HP and LUX devices, which are expected to cover high-end logic & storage Significant improvement; wafer edge The Bevel etching equipment has been developed and is about to enter customer verification.

[Accelerated breakthrough in thin film deposition] 1) Various types of film equipment have entered the market, some have received repeated orders, and development of many other key film equipment has progressed smoothly; 2) tungsten series thin film deposition products have completed the verification and acquisition of orders for CVD/HAR/ALD W tungsten equipment from many customers; 3) Various CVD and ALD devices are planned in the near future to increase film equipment coverage.

Advanced packaging+compounds widen the racetrack

[Advanced packaging TSV etching is expected to increase] The TSV process is an essential process for 2.5D CoWoS and 3D SoIC packaging. As demand for AI chips explodes, it is expected to lead to a rapid increase in demand for the company's TSV equipment.

[Silicon carbide helps MOCVD grow] Silicon carbide epitaxial equipment has been shipped to the client for verification testing in this issue; new MOCVD equipment for micro-LED applications has also been verified and tested on the client.

Investment advice

We keep the company's 2024-26 net profit forecast of 21.2/26.8/3.47 billion yuan unchanged, and the corresponding PE is 40/31/24X, respectively. Looking ahead to 2024, the company is full of active orders, showing a significant upward trend in performance, and maintaining a “buy” rating.

Risk warning

Market development for new etching/MOCVD equipment falls short of expectations; demand for advanced packaging falls short of expectations; downstream customer tenders fall short of expectations.