Core views

In 2023, the revenue of glue-coated imaging equipment increased by more than 40%, driving a steady increase in the company's overall revenue. Benefiting from the scale effect brought about by revenue growth and the trend of localization of components, the gross margin of the company's main products increased significantly, driving the company's performance growth. By the end of 2023, the company's on-hand orders were about 2.2 billion yuan (tax included), which provided good support for the 2024 results. I am optimistic about the steady growth of orders for the company's future gluing and cleaning equipment, as well as the increase in performance brought about by the release of new products such as chemical cleaning and temporary bonding and unbonding of new products.

occurrences

In 2023, the company achieved operating income of 1,717 billion yuan, an increase of 23.98%; net profit to mother was 251 million yuan, an increase of 25.21% year on year; net profit after deducting non-return to mother was 187 million yuan, an increase of 36.37% year on year.

2024Q1 achieved operating income of 244 million yuan, a year-on-year decrease of 15.27%; net profit to mother was 0.16 million yuan, a year-on-year decrease of 75.73%; net profit after deducting non-return to mother was 0.09 million yuan, a year-on-year decrease of 84.90%.

Brief review

Glazed imaging equipment drives steady revenue growth, and increased gross margin drives improved profitability and steady revenue growth. Glazed imaging equipment was the main driver. In 2023, the company's revenue reached 1,717 billion yuan, a year-on-year increase of 23.98%, achieving steady growth. In terms of revenue by product, the company's revenue for lithography process gluing and imaging equipment in 2023 was 1,066 billion yuan, up 40.80% year on year, accounting for 63.48% of revenue, mainly due to increased revenue from glued screen products; revenue of single-chip wet processing equipment was 600 million yuan, up 9.09% year on year, accounting for 35.73% of revenue, mainly for cleaning machines and glue remover products.

In terms of profitability, the company's gross margin was 42.53% in 2023, +4.13pct, with a significant increase in gross margin. Among them, the gross margin of lithography process gluing equipment and single-chip wet processing equipment was 38.84% and 46.37%, respectively, +4.19pct and +7.20pct, respectively. Benefiting from the scale effect brought about by the company's revenue growth and the trend of component localization, the company's cost side continued to improve, and gross margin increased significantly.

On the cost side, the company's expenses rate for the period reached 30.79%, +1.79pct. Among them, sales, management, R&D, and finance expenses were 8.27%, 10.60%, 11.52%, and 0.39%, respectively, +0.78pct, +0.36pct, +0.54pct, and +0.11pct, respectively. The company continues to promote R&D investment. In 2023, R&D expenses reached 198 million yuan, an increase of 30.06% over the previous year.

On the profit side, in 2023, the company's net profit to mother was 255 million yuan, up 25.21% year on year; net profit after deducting non-return to mother was 187 million yuan, up 36.37% year on year. The corresponding net interest rate and net interest rate not attributable to mother were 14.60% and 10.90%, respectively, +0.14pct and +0.99pct year-on-year, respectively. Benefiting from increased revenue and increased gross margins of major products, the company's performance grew steadily.

In terms of orders, in 2023, the company signed new orders throughout the year, which was basically the same as in 2022. By the end of 2023, the company had ongoing orders of about 2.2 billion yuan (tax included), which provided good support for the 2024 results.

2024Q1 performance declined markedly. In 2024Q1, the company achieved revenue of 244 million yuan, a year-on-year decrease of 15.27%. The decline in revenue was mainly affected by downstream prosperity in the advanced packaging and compounds sector. Affected by factors such as whether the overall production line was connected, the inspection of some Q1 machines fell short of expectations. As a result, there were relatively few 2024Q1 inspection machines, and revenue fluctuated seasonally. In terms of profitability, 2024Q1 achieved a gross profit margin of 40.30%, a year-on-year ratio of -5.02pct. We believe it was mainly due to changes in product structure that led to a decline in profitability. On the profit side, 2024Q1's net profit to mother and net profit after deducting non-return to mother were respectively 16 million yuan and 0.09 million yuan, down 75.73% and 84.90%, respectively. The corresponding net interest rate to mother and net interest rate after deducting non-return to mother were 6.56% and 3.53%, respectively, and -16.34pct and -16.29pct, respectively. There was a sharp decline on the profit side, mainly due to ① an increase in employee remuneration: the number of employees increased a lot, and 2024Q1 employee compensation expenses increased 35% year on year; ② a sharp increase in share payments: 1.26 million new restricted shares were granted to incentive recipients in August 2023, resulting in a 266% year-on-year increase in share payment fees in the first quarter of 2024; ③ decrease in software VAT rebates: Affected by the specific disbursement time of local finance, the software VAT rebates received by 2024Q1 decreased by 43% year on year.

Sales and order delivery performance of major mass production equipment was excellent. In terms of new orders, the company's front-end gluing and imaging equipment maintained a good year-on-year growth rate, and the domestic market share further increased; front-end cleaning equipment orders were steady, and physical cleaning machines continued to maintain the leading position in the industry; advanced packaging and small-size signings were phased under pressure due to downstream market sentiment.

(1) Frontier adhesive imaging equipment: At present, various models of products including offline, i-Line, KrF and ArF submersible have been successfully launched. New orders have maintained a good growth rate, and the submersible machine has received orders from 5 important domestic customers. In addition, the company has also made good progress in sales of new machines such as high-end NTD negative imaging and SOC coating, further expanding the process application scenarios and market space of the company's glued imaging equipment.

(2) Qiandao cleaning equipment: Qiandao physical cleaning machines have become the main production models for domestic logic and power device customers, and are widely used in first-tier factories such as SMIC, Shanghai Huali, Qingdao Xinen, Guangzhou Yuexin, Shanghai Jita, and Xiamen Silan. A new generation of high-capacity physical cleaning machines has been sent to important domestic storage customers for verification. The machine uses a next-generation high-capacity architecture, which can meet the storage customers' higher production capacity requirements, and is expected to open up incremental space in the storage field.

(3) Advanced packaging equipment: Backend advanced packaging equipment and single-chip wet processing equipment have been used as mainstream models in batches for many years in large domestic and international first-tier factories such as TSMC, Shenghe Jingwei, Changdian Technology, Huatian Technology, Tongfu Microelectronics, and Zhuhai Tiancheng, etc., to achieve product sales to many overseas customers within 2023.

(4) Small-scale equipment such as compounds: It has been used as mainstream models in batches in major domestic first-tier factories such as San'an Integrated, Huacan Optoelectronics, Qianzhao Optoelectronics, Beijing Saiwei, and Jiangxi Zhaochi, etc., and has become the main production equipment for clients. Sales in this segment declined in 2023 due to the sentiment in the downstream market.

New product development and commercialization are progressing smoothly, and the new product development business coverage is being expanded before and after (1) Qiandao Chemical Cleaning Equipment: The new product has received verification orders from important domestic customers, and is expected to provide a stable performance growth point along with Qiandao Glazing Equipment. The company's new strategic product, the Qiandao Chemical Cleaning Machine KS-CM300/200, was officially launched in March 2024 and received verification orders from important domestic customers in the fourth quarter of 2023. Currently, the company has reached cooperation agreements with many other important domestic customers, and some customers have entered the configuration confirmation and business process stage. Qiandao cleaning equipment has a higher degree of standardization than front-end gluing and imaging equipment, and the verification cycle is shorter, and it is expected that the market share will increase rapidly after passing the verification.

(2) Temporary bonding and unbonding equipment: Systematic research and development began in 2021 and has entered the small-batch sales stage. In 2021, the company received support from important domestic storage customers and began to systematically develop temporary bonding and unbonding equipment. At present, the overall technology of the company's temporary bonding and unbonding machines has reached the international advanced level, and has successively received orders from leading domestic customers and entered the small-batch sales stage. In addition, the company's new product Frame cleaning equipment in the field of 2.5D/3D advanced packaging has now also entered the small-batch sales stage. In response to Chiplet technology solutions, the company deployed self-developed fully automatic temporary bonding and unbonding machines in advance, which can be applied to 2.5D and 3D technology route products such as InFO, CoWOS, and HBM. They are compatible with mainstream rubber processes at home and abroad, and can meet the needs of ultra-large film thicknesses of 60 microns and above.

(3) Fully automatic SiC chipping machine: The all-in-one chipping machine was released in 2024, and the business expanded to the field of scraping. In March 2024, the company released the fully automatic SiC chipping machine KS-S200-2H1L. The machine was jointly developed by the company's Japanese subsidiary and partners to help expand the company's business into the field of chipping and further enhance the company's comprehensive competitive advantage in the small-size field.

Investment advice

The company is expected to achieve net profit of 318, 4.45, and 562 million yuan respectively in 2024-2026, with year-on-year increases of 26.80%, 39.89%, and 26.33%, respectively. Corresponding PE is 38.42x, 27.47x, and 21.74x respectively, maintaining a “buy” rating.

Note: Due to the long inspection cycle of semiconductor equipment, due to factors such as whether the overall production line is connected, some Q1 machines fell far short of expectations. We believe that Q1 unconfirmed revenue will be confirmed in Q2. Seasonal fluctuations will not affect full-year revenue expectations. The company's on-hand orders at the end of 2023 are 2.2 billion yuan (tax included), and the company's ongoing orders of 2.2 billion yuan (tax included) at the end of 2023, as well as the smooth release and development of the company's various new products, and the smooth progress of 2024 full-year results can be expected.