Incidents:

1. The company released its 2023 annual report. In 2023, it achieved revenue of 6.264 billion yuan, an increase of 32.15% over the previous year; realized net profit attributable to owners of the parent company of 1,786 billion yuan, an increase of 52.67% over the previous year; and realized net profit without deduction of 1,191 billion yuan, an increase of 29.58% over the previous year.

2. Looking at Q4's single-quarter results, we achieved revenue of 2,222 billion yuan, up 30.97% year on year and 46.71% month on month; realized net profit attributable to owners of the parent company of 626 million yuan, up 66.08% year on year, up 299.11% month on month; realized net profit without return to mother of 458 million yuan, up 66.13% year on year and 113.18% month on month.

3. The company released its report for the first quarter of 2024. 2024Q1 achieved revenue of 1,605 billion yuan, a year-on-year increase of 31.23%; realized net profit attributable to owners of the parent company of 249 million yuan, a year-on-year decrease of 9.53%; and realized net profit without deduction of 263 million yuan, an increase of 15.4% over the previous year.

Equipment orders increased significantly year-on-year throughout the year, and 24Q1 revenue continued the high growth trend:

The company achieved revenue of 6.264 billion yuan in 2023, an increase of 32.15% over the previous year, of which special equipment achieved revenue of 5.166 billion yuan, an increase of 34.26% over the previous year; spare equipment achieved revenue of 971 million yuan, an increase of 16.32% over the previous year. The total amount of new orders added by the company during the reporting period was about 8.36 billion yuan, an increase of 32.3% over the previous year. Among them, new orders for etching equipment reached 6.95 billion yuan, an increase of 60.1% over the previous year. In 2023, the company's net profit to mother increased sharply by 52.67% year-on-year. The main reason was that revenue growth and gross profit remained at a high level during the reporting period, and rapid revenue growth led to an increase in profit. Looking at 24Q1, the company's revenue continued its high growth trend, with total revenue of 1,605 billion yuan, an increase of 31.23% over the previous year, of which etching equipment was 1,335 billion yuan, an increase of 64% over the previous year, and the share of etching equipment revenue continued to increase. In terms of profitability, the 24Q1 gross profit margin was 44.94%, close to the same period last year, and gross margin remained stable.

Advanced process etching equipment is progressing smoothly, and the coverage of thin film deposition equipment continues to increase:

In terms of etching equipment research and development, the company invests heavily in the development and verification of key etching equipment in advanced chip manufacturing technology. Currently, various devices for the most critical etching processes in logic and memory chip manufacturing have been verified on customer production lines. In terms of film deposition equipment research and development, the company has now entered the market with a variety of equipment products. Tungsten series thin film deposition products can cover all tungsten applications in memory devices, and has completed verification of CVD/HAR/ALD W tungsten equipment by many logic and storage customers, and has obtained customer orders. In addition, the company has recently planned a variety of CVD and ALD equipment to increase the coverage of film equipment and further expand the market.

Investment advice:

We expect the company's revenue from 2024 to 2026 to be 8.268 billion yuan, 10.914 billion yuan, and 14.406 billion yuan, respectively, and net profit to mother of 2,093 billion yuan, 2.64 billion yuan, and 3.47 billion yuan respectively. Consider the company's core technology and customer advantages in the field of etching equipment, as well as the smooth progress of new equipment breakthroughs and industrialization under the company's platform-based strategy. The company was given a valuation of PE51.00X in 2024, corresponding to a target price of 172.38 yuan. Give it a “buy-A” investment rating.

Risk warning: Downstream fab production expansion falls short of expectations, introduction of new products falls short of expectations, the Sino-US game affects the supply chain, and market competition intensifies.