Core views:

The market share of CMP continues to increase, and the scale of the wafer recycling and maintenance business is gradually increasing. The company published its annual report for '23 and its quarterly report for '24. In '23, the company's revenue was 2,508 billion yuan, yoy +52.11%; net profit to mother was 724 million yuan, yoy +44.29%; gross profit margin 46.02%, yoy-1.71pct, net profit margin 28.86%, yoy-1.56pct. In '23, the company's CMP products received recognition from more customers and achieved many batch sales, and the market share continued to increase; the company's wafer recycling business received batch orders from many large production lines and stable supply over a long period of time. At the same time, as the company's market holdings of CMP products continued to expand, the scale of business such as key consumables and maintenance services gradually increased, and operating income and net profit increased significantly year-on-year during the same period. 24Q1, the company's revenue was 680 million yuan, yoy +10.4%, qoq +1.88%; net profit to mother was 202 million yuan, yoy +4.27%, qoq +26.49%; gross profit margin 47.92%, yoy+1.27pct, qoq+3.12pct; net profit margin 29.72%, yoy-1.75pct, qoq+5.78pct.

CMP iterative updates consolidate the leading edge and rapidly break through new products such as thinning and cutting. According to the company's 23 annual report, the company's first Universal H300 machine has been sent to the client for verification, has completed small-batch verification of multiple processes, and is expected to achieve mass production in 24 years; the thinning equipment has received batch orders from leading companies in various fields, and several mass-produced machines have been sent to the client; the company's 12-inch wafer thinning and coating all-in-one machine has obtained a demo order for an integrated circuit packaging test leader. At the same time, the dry-finish package thinner is expected to be sent to the client for verification in the first half of '24; the company's 12-inch wafer edge cutting equipment is expected to be sent to the client for verification in the first half of '24; the company's 12-inch wafer edge cutting equipment is expected to be sent to the client for verification in the first half of '24; the company's 12-inch wafer edge cutting equipment is expected to be delivered to the client for verification in the first half of '24; the company's 12-inch wafer edge cutting equipment is expected to be delivered to the client for verification in It was sent to a leading storage manufacturer for verification in the first half of the year. With the company's outstanding advantages in the CMP field and the launch of several new categories of equipment products, the company is expected to take the lead in benefiting from the expansion of downstream wafer production lines and the domestic replacement process of equipment.

Profit forecasting and investment advice. The company's net profit for 24-26 is expected to be 9.82/12.49/1,536 billion yuan, keeping the company's view of a reasonable value of 249.61 yuan/share unchanged, corresponding to 40 times PE in 24, maintaining a “buy” rating.

Risk warning. Fab production expansion falls short of expectations; changes in industrial policy; market development falls short of expectations.