The company's 2024Q1 performance increased significantly year on year, and gross margin continued to improve. Maintaining the “buy” rating, the company released its 2024 quarterly report. The company achieved operating income of 3.106 billion yuan, +38.72% year over year, and -3.83% month on month; net profit to mother was 57 million yuan, +163 million yuan, -60.24% month on month; after deducting non-net profit -77 million yuan, year-on-year, +105 million yuan; gross profit margin 8.52%, +4.53pcts, month-on-month- 1.36pcts; net profit margin 1.84%, +6.59pcts yoy, -2.61pcts month-on-month. As the sealing and testing industry cycle gradually recovers, the company's operating rate is expected to continue to increase. We maintain our profit forecast for 2024-2026. We expect net profit to be 6.64/10.30/1,537 billion yuan, EPS is 0.21/0.32/0.48 yuan, and the current stock price is 39.3/25.3/17.0 times, maintaining a “buy” rating.

The controlling shareholder increased the company's shares, demonstrating confidence in long-term development

According to the company's announcement, as of April 23, 2024, Huatian Electronics Group, the controlling shareholder of the company, has increased its holdings of about 121 million shares through centralized bidding with self-financing, accounting for 0.66% of the company's total shares, and a total increase of 162 million yuan. Huatian Electronics Group increased its shareholding in the company, showing confidence that the company will continue to develop steadily in the future.

Actively expand customer introduction and build advanced packaging capacity to help long-term development in 2023. In a market environment where competition in the integrated circuit industry is intensifying, the company will implement and continuously improve customer development management models to improve services and increase market share for existing key customers; collaboratively develop new target customers to accelerate the process of product introduction and mass production; by the end of 2023, the company had introduced 302 customers. Furthermore, according to market development and customer needs, the company implemented capital raising investment projects and the construction of new production bases such as Huatian Jiangsu. By the end of 2023, 4.908 billion yuan of capital raised had been used, and it is planned to complete the construction of the fund-raised investment project in 2024. In terms of the construction of a new production base, Unisem Gopeng is currently constructing a plant. Huatian Jiangsu Phase I and Huatian Shanghai have completed the construction of plants and supporting facilities, and are actively preparing for production. It initiated the establishment of Jiangsu Pangu, which is controlled by Huatian Jiangsu. Jiangsu Pangu is mainly engaged in FOPLP integrated circuit sealing and testing business. In 2024, the company plans to complete the construction of the fund-raising investment project, carry out the construction of the FOPLP production line in Pangu, Jiangsu, and promote the steady increase in fund-raising investment projects and Huatian Jiangsu and Huatian Shanghai as soon as possible to promote the continuous expansion of the company's packaging scale.

Risk warning: The recovery in industry sentiment falls short of expectations, the progress of production expansion falls short of expectations, and technology research and development falls short of expectations.