Matters:
On April 26, 2024, the company released the 2023 Annual Report and the 2024 Quarterly Report:
1) 2023: Operating income of 1,717 billion yuan, +23.98% year over year; gross profit margin of 42.53%, +4.13pct year on year; net profit from mother/after deduction of 2.51/187 million yuan, +25.21%/+36.37% year on year;? 2) 2024Q1: Operating income of 244 million yuan, -15.27% YoY, -52.16%; gross profit margin 40.30%, YoY -5.01pct, -2.38pct month-on-month; net profit to mother of 0.16 million yuan, -75.73% YoY, -47.33% month-on-month; net profit without deduction of 0.09 million yuan, -84.90% YoY, +59.41% month-on-month.
Commentary:
Short-term performance has fluctuated, and Qiandao Track+ chemical cleaning volume is expected to drive the company's performance back to high growth.
The competitiveness of the company's future track and other products continues to improve, driving steady growth in performance and continuous improvement in profitability in 2023. By product, in 2023, the company achieved revenue of 1,066 billion yuan, +40.80%, gross profit margin of 38.84%, +4.19pct year on year; revenue of single-chip wet process equipment was 600 million yuan, +9.09% year on year, and gross profit ratio of 46.37%, compared to +7.20 pct year on year. Affected by customer orders and the pace of production and delivery in 2023, the company's 2024Q1 performance fluctuated. In terms of orders, the company's contract debt at the end of March 2024 increased from 375 million yuan at the end of December 2023 to 414 million yuan. In the future, with the company's successive deliveries and the release of new products such as chemical cleaning machines, the performance is expected to resume high growth.
The domestic substitution process is accelerating, and the company is expected to rapidly increase its share with the advantage of Qiandao Track card positions. Currently, the domestic front-end glue-coated imaging equipment market is still highly monopolized by Tokyo Electronics in Japan, and changes in the external trade environment are accelerating the replacement of domestic production. The company is currently the only domestic manufacturer that can provide mid-range and high-end mass-produced glued imaging equipment. Currently, it has successfully launched various models of products such as offline, i-Line, KRF and ArF submersible, and the process level of some models of equipment can match mainstream international machines. As of the 2023 annual report, the company's submersible machines have received orders from 5 important domestic customers, and good progress has also been made in sales of new machines such as high-end NTD negative imaging and SOC coating. The company is expected to rapidly increase its share in the future with its card position advantage.
The company insists on independent research and development to build core barriers and broaden the product matrix to open up room for growth. The company maintains a high level of investment in R&D and continues to promote product platform-based layout. In the field of Qiandao cleaning equipment, the company's single-chip physical cleaning equipment Spin Scrubber has reached the international advanced level and has become the mainstream model for well-known domestic fabs. The Qiandao chemical cleaning machine KS-CM300/200 was officially launched in March 2024, and verification orders from important domestic customers were obtained in 2023Q4. In addition, the company has a comprehensive layout and significant competitive advantage in small-size fields such as advanced packaging and compounds. For the Chiplet technology field, the company deployed fully automatic temporary bonding and unbonding machines ahead of schedule, which is expected to benefit deeply from the recovery in demand and changes in advanced packaging technology in the future.
Investment suggestion: The domestic replacement process for semiconductor equipment is being accelerated. As a leading domestic adhesive developer, the company has obvious card position advantages. At the same time, single-chip chemical cleaning equipment is expected to be rapidly released. We maintained the company's 2024-2025 revenue forecast of 22.02 billion yuan and added a 2026 revenue forecast of 3.806 billion yuan. Referring to the company's historical valuation and industry-comparable company valuation, we gave 2024 8 times PS, and the corresponding target price was 127.8 yuan, maintaining a “strong” rating.
Risk warning: Changes in the international trade situation; downstream customer production expansion falls short of expectations; upstream parts supply is scarce.