The 2023 performance was high, and shipments of CMP equipment increased dramatically. The new model progressed smoothly. Huahai Qingke achieved full year revenue of 2,508 million yuan (+52.11% yoy) and net profit of 724 million yuan (+44.29% yoy). Mainly due to increased market share of CMP products, wafer recycling and other businesses, it received bulk orders and gradual expansion of key consumables and maintenance services. The company's gross margin in 2023 was 46.02%, -1.70pcts year-on-year. 1Q24 had revenue of 680 million yuan (+10.40% yoy), net profit to mother of 202 million yuan (+4.27% yoy), gross margin of 47.92%, +1.27pcts year over year. Optimistic for the company to lay out new opportunities in the field of integrated circuits such as CMP equipment, thinning equipment, cutting equipment, wet process equipment, measuring equipment, wafer regeneration, and consumables services. We expect the company's 24/25/26 revenue to be 33.3/44.8/5.85 billion yuan, and the average PS value for the industry in 2024 will be 9.2 times. The company's new products will gradually be released, giving a certain valuation premium, corresponding to 10.5 x 24 PS, to maintain “purchase”. The target price is 219.87 yuan.
2023 review: CMP equipment revenue increased significantly, and thinning, cutting and cleaning equipment progressed smoothly. In 2023, the company's CMP equipment revenue was 2,278 billion yuan, accounting for 90.82%, up 59.20% year on year, and gross profit margin 46.02%; business revenue from wafer regeneration, key consumables and maintenance services was 230 million yuan, accounting for 9.18%, up 5.55% year on year, and gross profit margin of 45.98%. The company's gross margin in 2023 was 46.02%, down 1.70pct year over year. The company launched the Versatile-GP300 mass production machine and has obtained batch orders from several leading companies; the 12-inch wafer thinning and coating all-in-one machine has obtained Demo orders for leading packaging testing, and the company's development of a dry-polish packaging thinner is expected to be verified in the first half of 2024. A 12-inch wafer edge cutting machine, a 12-inch single-chip terminal cleaner, a brush cleaning device for 4/6/8 inch compound semiconductors, and a cleaning device for 4/6/8/12 inch chip cartridges have been sent to the client for verification.
1Q24&24 outlook: Revenue is expected to continue to grow, with “equipment+service” building a moat Huahai Qingke 1Q24 with revenue of 680 million yuan (+10.40% yoy), net profit to mother of 202 million yuan (+4.27% yoy), gross margin of 47.92%, +1.27pcts year over year. 1Q24 invested 80 million yuan in R&D, an increase of 24.26% over the previous year. The company launched the Universal H300, which has now completed small-batch verification of multiple processes, and is expected to achieve mass production in 2024. The Universal-150Smart for third-generation semiconductor and other customers has been shipped in small quantities. At the same time, new models are being actively developed and are expected to be sent to customers for verification in 2024. SEMI expects semiconductor manufacturing equipment to resume growth in 2024, and is optimistic about the company's growth as downstream production expands actively and the localization rate of semiconductor equipment increases in 24.
Valuation: Maintain the “buy” rating and adjust the target price to 219.87 yuan. Considering the long time to confirm revenue from new products, we adjusted the company's 24-25 revenue forecast to $33.3/4.48 billion yuan (previous value: $37.7/4.61 billion). In 2024, the average PS value of the industry was 9.2 times. The company's new products were gradually released. We gave a certain valuation premium, corresponding to 10.5 x 24 PS, maintain the “purchase”, and adjust the target price to 219.87 yuan (previous value: 237.21 yuan).
Risk warning: In the global semiconductor downturn cycle, demand for semiconductor equipment falls short of expectations, and industry competition intensifies.