The company released its 24Q1 quarterly report. 24Q1 achieved revenue of 263 million yuan, YoY -26.60%, QoQ +21.93%; realized net profit to mother of 0.29 million yuan, a year-on-year decrease of -50.39%. Achieved gross profit margin of 37.61%, YOY-1.68pcts, QoQ+8.19pcts; net profit margin 10.32%, YOY-5.90pcts, QoQ+9.11pcts. The year-on-year decline in the company's revenue was mainly due to a contraction in downstream demand starting in 2023Q2, while the 2023Q1 base was high. However, we saw significant month-on-month improvements in revenue and profit margins, mainly due to a recovery in downstream demand. The company followed the trend and upgraded its product matrix to increase the share of miniLED solidifiers and semiconductor packaging and testing equipment with high gross margins.

Reserve a number of semiconductor packaging and testing equipment technologies, and make efforts to replace deep-water areas with domestic production. According to the 2023 annual report, the company is developing a number of semiconductor packaging and testing equipment technologies, including the development of high-precision fully automatic semiconductor chip planar lead bonding equipment, the development of an all-in-one machine for turret semiconductor testing, sorting, marking and coding, the development of eutectic welding processes suitable for IC lead frames, and a 12-inch wafer swing arm rotating crystal fixing machine with suction head, etc. Due to the extremely high 3D positioning and accuracy requirements of packaging equipment, the localization rate of semiconductor packaging and testing equipment is still low. The company has been focusing on research and development of related technologies for many years, making efforts to develop domestic packaging equipment in deep-water areas.

Downstream customers were the first to benefit from the expansion of production, and MiniLED orders were sufficient. With the gradual penetration of MiniLED in the medium and large screen market, replacing LED small-pitch screens, and the gradual transformation of automotive displays to miniLED, the MiniLED market is rapidly expanding, and downstream manufacturers are strongly willing to expand production. The company's MiniLED crystallizer has excellent performance and will greatly benefit downstream customers from expanding production. As of December 26, 2023, the company's total on-hand contract order amount in the MiniLED die fixing machine segment was 413 million yuan, supporting the growth of MiniLED crystal soldering machine revenue in 2024. As the share of miniLED crystal soldering machines in the product structure increases, the profit margin of the company's crystal fixing machine business line is expected to increase across the board.

Profit forecast and investment advice: We expect the company to achieve revenue of $1,47/20.5/2.79 billion and net profit to mother of $23/38/53 billion in 2024-2026, corresponding to PE29x/17x/12x. We are optimistic about the company's position as a leading domestic investor in the crystallizer market. It will benefit from the increased penetration rate of MiniLED. The company's new semiconductor products are expanding smoothly, the volume is imminent, and it maintains a “highly recommended” rating.

Risk warning: downstream demand falls short of expectations; new product development progress falls short of expectations; new technology promotion progress falls short of expectations.