The company's 2024Q1 performance was high year-on-year, and gross margin continued to improve. Maintaining the “buy” rating, the company released its 2024 quarterly report. In 2024Q1, the company achieved operating income of 5.282 billion yuan, +13.79%, or -16.98%; net profit to mother of 98 million yuan, +2064.01%, or -57.75% month-on-month; deducting non-net profit of 95 million yuan, year-on-year, +14.023 billion yuan, or -56.88% month-on-month. The gross profit margin was 12.14%, +2.69pcts year over year, and -0.49pcts month-on-month. We maintain the company's 2024-2026 profit forecast. The net profit for 2024/2025/2026 is expected to be 977/12.59/1,639 million yuan, the corresponding EPS for 2024/2025/2026 is 0.64/0.83/1.08 yuan, and the current stock price corresponding to PE is 33.0/25.6/19.6 times. We are optimistic that the company, as a leading domestic sealing and testing leader, will maintain a “buy” rating due to the resilience of the recovery cycle and the growth of advanced packaging.
The proposed acquisition of 26% of Jinglong Technology's shares will bring stable financial returns to the company. The company plans to use self-raised capital of 1,378 billion yuan (tax included) to acquire 26% of Jinglong Technology's shares held by Jingyuan Electronics through KYEC. According to semiconductor industry observations, Jinglong Technology is the only testing subsidiary of Jingyuan Electronics in mainland China. The monthly production capacity for wafer needle measurement is 60,000 pieces, and the test capacity for finished IC products can reach 60 million pieces/month. Service areas include wafer needle testing, IC finished product testing, and wafer grinding/cutting/grain picking. The product line covers Memory, Logic, Mixed-Signal, SoC, CIS/CCD, LCD Driver, and RF/Wireless. The total number of test machines has exceeded 300. Among them, the test scale for driving ICs and eFlash has reached the leading position in China. According to the company announcement, Jinglong Technology's revenue for 2022/2023 was 21.15 billion yuan, and net profit was 46/420 million yuan respectively, corresponding to a net interest rate of 21.94%/19.67%. The acquisition of part of Jinglong Technology's shares can increase the company's investment income, bring stable financial returns to the company, and create more value for all shareholders.
Packaging technologies such as 2D+ have been verified to accelerate the expansion of the advanced packaging industry. By the end of 2023, the company's ultra-large 2D+ packaging technology, 3-dimensional stacked packaging technology, and large-size multi-chip chip last packaging technology had been verified. The company plans to invest a total of 4.89 billion yuan in facility construction, production equipment, IT, technology research and development in 2024, continue to invest heavily in advanced packaging research and development such as 2D+, actively open up Chiplet market-based applications, lay out higher quality, higher performance and more advanced packaging platforms ahead of time, continuously strengthen in-depth cooperation with customers, and expand the advanced packaging industry landscape.
Risk warning: The recovery in industry sentiment falls short of expectations, capacity construction falls short of expectations, and new product development falls short of expectations.