Event: Tuojing Technology released its 2023 annual report and 2024Q1 quarterly report. In 2023, the company achieved revenue of 2.705 billion yuan, a year-on-year increase of 58.60%; net profit to mother was 663 million yuan, up 79.82% year on year; 2024Q1 achieved revenue of 472 million yuan, up 17.25% year on year; net profit to mother was 0.1 billion yuan, down 80.51% year on year

The semiconductor film deposition equipment business developed steadily in 2023: The company's products have covered a full range of PECVD film materials, received batch orders and batch acceptance, and are widely used in domestic integrated circuit manufacturing lines. The company's first PECVD LoKⅡ process equipment and ADC II process equipment have passed the inspection and have achieved industrial application. In addition, the company has developed and launched new pX and Supra-D reaction chambers, which can achieve more stringent film process specifications and meet the increasingly stringent process requirements of chip technology.

Multiple factors put pressure on the results of the first quarter of 2024: the company's 2024 Q1 inspection machines are mainly new products. The inspection cycle is longer than that of mature products, and revenue recognition will be delayed to a certain extent. Second, the company's 2024Q1 shipment amount increased by more than 130% year-on-year, and the expansion of business scale led to a significant increase in related expenses. In addition, the company continued to expand new products and processes and maintained a high R&D investment. 2024Q1 R&D expenses reached 153 million yuan, an increase of 78.09% over the previous year; the above reasons led to a year-on-year decline in the company's net profit to mother.

Promoting hybrid bonding equipment into the field of advanced packaging: the hybrid bonding process can effectively improve inter-chip communication bandwidth and chip system performance, and effectively shorten the chip development cycle. Tuojing Technology's first wafer-to-wafer bonding product, the Dione 300, has successfully passed customer verification and received a repurchase order. The repurchased equipment has once again passed verification, becoming the first domestically produced hybrid bonding equipment used in mass production. Its performance and production capacity indicators have reached the leading international level.

Investment advice: Considering the strong demand for domestic semiconductor equipment and the continuous expansion of the company's product range, we expect the company's net profit to be 8.35/12.05/1,557 billion yuan from 2024 to 2026, corresponding PE ratio of 40.94/28.37/21.96 times, maintaining the “increase” rating.

Risk warning: Overseas supply risks; domestic fab equipment procurement is slowing down; new product development progress falls short of expectations; industry competition intensifies.