Description of the event

The company released its 2023 annual report and 2024 quarterly report. The full year of 2023 achieved revenue of 478 million yuan, an increase of 34.31% year-on-year. Achieved net profit of 129 million yuan to mother, an increase of 5.30% over the previous year. Achieved net profit of 110 million yuan without return to mother, an increase of 7.09% year on year; achieved operating income of 222 million yuan in the fourth quarter of 2023, 23.64% year on year and 72.22% month on month. Achieved net profit of 78 million yuan, -12.07% year over month, 175.83% month on month; achieved operating income of 44 million yuan in the first quarter of 2024, up 100.65% year on year, up -80.19% month on month, and realized net profit to mother of -23 million yuan, up -667.92% year on year, and -129.45% month on month.

Incident reviews

R&D investment continues to grow, and future performance potential continues to grow. R&D investment in 2023 was 207 million yuan (124 million yuan last year), up 67.70% year on year, accounting for 43.38% of revenue. The R&D team expanded rapidly, and the number of R&D personnel increased by 67.74% year on year, accounting for 83.20% of the total number of employees.

The company continues to increase investment in R&D and continuously improve the software and hardware product layout of the company's “EDA software+data analysis software+testing equipment”. In 2024, we will continue to invest: (1) research solutions such as 3D packaging and on-chip monitoring to comprehensively monitor the entire process of chips from design to terminal application and utilize value; (2) develop automotive-grade EDA, graphic matching and other tools to further improve DFM and DFT tool sets; (3) continue to iterate offline big data analysis systems and continue to develop online big data analysis systems such as DE-FDC, the statistical process control analysis system DE-SPC; (4) Continuously expand the application scenarios and product categories of wafer-level electrical testing equipment, Expand research and development of key components with partners.

The layout of wafer-level test equipment is more complete, and future growth can be expected. In 2023, revenue from testing machines and accessories was 384 million yuan, up 57.58% year on year (previous value: 142.27%). In July 2023, the company launched the T4000 model, which is suitable for use in cost-sensitive compound semiconductor production lines of 8 inches and below.

Based on the T4000 series, the company also expanded the equipment from WAT testing to fields such as WLR and SPICE. In 2023, 79 units were sold, with an average value of 4.86 million yuan per unit, and 51 units sold in 2022, with an average value of 4.78 million yuan per unit. It is expected that in the future, with the gradual delivery confirmation of T4000 models and WLR equipment, the company's measurement equipment revenue will continue to grow appreciably.

The EDA software layout is more complete, and the synergy with iRockchip is beginning to show. (1) The process process monitoring (PCM) solution has been extended to mass production. It has been verified and optimized in many production lines, and some production lines have already entered application delivery; (2) CMP EXPLORER, a self-developed chemical mechanical polishing process modeling tool, is currently being tested and introduced in many leading domestic fabs and is expected to start contributing to revenue in 24 years; (3) released a one-stop testability (DFT) design solution. After the company completed the DFT full-process design tool, TEXP, launched a solution covering the DFT full-process design tool. The solution supports DFT design implementation requirements of chips and scales in different application fields such as MCU, AI, GPU, network, 5G baseband, AP, etc., and supports In-System-Test for system-level testing to help functional safety test solutions for automotive electronics.

Data analysis software has gradually entered the commercial implementation stage, and the first level of growth has gradually begun to gain strength. (1) The company's existing semiconductor offline data analysis system, including the semiconductor generalized analysis tool DE-G, integrated circuit yield analysis and management system DE-YMS, the integrated circuit defect management system DE-DMS, and DE-ADC, has been developed and matured and has entered the market expansion and commercial implementation stage; (2) Continued expansion of intelligent online data tools. The semiconductor equipment anomaly monitoring and classification system DE-FDC products developed by the company have completed the first version and have entered the trial stage for customers in fabs and sealed testing plants. (3) The company uses DE-ADC, an automatic defect classification system based on cutting-edge artificial intelligence vision technology, and expands the extended development of the semiconductor one-stop machine learning platform InF-AI to achieve efficient and high-precision classification of wafer defects.

Investment advice

It is estimated that in 2024-2026, the company's revenue will be 770/11.05/1,512 million yuan, respectively, 61.3%/43.5%/36.8%; net profit to mother will be 2.03/3.09/466 million yuan, respectively, up 57.9%/50.9% year on year, corresponding EPS of 1.02/1.54/2.33 yuan. Based on the closing price of 51.95 yuan on May 6, 2024, the 2024-2026 PE was 51.1X/33.6X/22.3X, respectively. Maintain a “buy-A” rating.

Risk warning

Fab production expansion fell short of expectations; new product development fell short of expectations; software business progress and customer expansion fell short of expectations.