Core views

Benefiting from strong downstream demand for domestic semiconductors, the company achieved a high increase in revenue in 2023. Benefiting from scale effects, the company's overall cost ratio improved, and performance grew steadily. The company's “equipment+service” platform-based development strategy continues to advance, vigorously exploring new opportunities in integrated circuit fields such as CMP equipment, thinning equipment, cutting equipment, wet process equipment, measuring equipment, wafer regeneration, and consumables services. As leading domestic manufacturers launch batch tenders one after another, it is expected that the company's order level will further improve in 2024, and we are optimistic about the company's new product verification and shipment progress.

occurrences

In 2023, the company achieved operating income of 2,508 billion yuan, an increase of 52.11%; net profit to mother of 724 million yuan, an increase of 44.29% over the previous year; net profit after deducting non-return to mother was 608 million yuan, an increase of 60.05% over the previous year.

2024Q1 achieved operating income of 680 million yuan, an increase of 10.40% year on year; net profit to mother was 202 million yuan, up 4.27% year on year; net profit after deducting non-return to mother was 172 million yuan, up 2.78% year on year.

Brief review

Strong downstream demand has driven the company's revenue growth, and the scale effect has led to an increase in domestic demand for semiconductor equipment, which has led to a significant increase in revenue. In 2023, the company achieved revenue of 2,508 billion yuan, an increase of 52.11% over the previous year, and achieved rapid growth.

By business, in 2023, the company's CMP equipment revenue was 2,278 billion yuan, up 59.20% year on year, accounting for 90.82% of revenue. The company's CMP equipment achieved a good market reputation in the fields of logic chips, memory chips, advanced packaging, large silicon wafers, MEMS, microLED, SiC and other third-generation semiconductors. The market share continued to break through, benefiting from increased demand for semiconductor equipment in major domestic fabs, and achieved significant revenue growth; the company's revenue from other businesses such as wafer regeneration, key consumables and maintenance services was 230 million yuan , a year-on-year increase of 5.55%.

In terms of profitability, the company's gross margin in 2023 was 46.02%, -1.70pct year on year, of which CMP equipment gross margin was 46.02%, -1.63pct year on year; the gross profit margin of other businesses was 45.98%, -2.24pct year on year. Overall gross margin remained relatively stable. On the cost side, the company's expense ratio reached 21.83%, or -2.79pct. Among them, sales, management, R&D, and finance expenses were 5.38%, 5.69%, 12.12%, and -1.35%, respectively. The year-on-year ratio was -0.70pct, -0.40pct, -1.02pct, and -0.68pct, respectively. The scale effect was evident in the context of a significant increase in revenue scale. Combined with cost control, the cost ratio improved in all periods of 2023. On the profit side, in 2023, the company achieved net profit of 724 million yuan, an increase of 42.99%; net profit without return to mother was 608 million yuan, an increase of 60.05% year on year. The corresponding net interest rate to mother and net interest rate after deduction were 28.86% and 24.25%, respectively, -1.56 pct and +1.20 pct year-on-year respectively.

Benefiting from the increase in the company's sales scale, the company's performance achieved rapid growth.

2024Q1's revenue and performance continued to grow steadily, and profitability declined slightly. 2024Q1 achieved operating income of 680 million yuan, up 10.40% year on year; achieved gross profit margin of 47.92%, +1.27pct year on year; on the cost side, the 2024Q1 company's expense ratio reached 22.02%, +3.32pct year on year, of which sales, management, R&D, and financial expenses rates were 5.96%, 6.14%, 11.38%, and -1.46%, respectively +0.81pct, +1.98pct, + 0.88pct and -0.34pct; On the profit side, net profit to mother and net profit without return to mother were 220 million yuan and 172 million yuan respectively, up 4.27% and 2.78% year-on-year respectively. The corresponding net interest rate to mother and net interest rate after deduction were 29.72% and 25.25%, respectively, -1.75pct and -2.63pct, respectively. Against the backdrop of relatively small revenue growth, the company continued to push forward investment in sales, management, and R&D expenses, and profit margins declined slightly.

The company's “equipment+service” platform-based development strategy continues to advance, and all product categories have achieved positive results. The company continues to cultivate key semiconductor equipment and technical services, and has achieved positive results in CMP equipment, thinning equipment and other products.

(1) CMP equipment: The new model is expected to be mass-produced in 2024, and R&D and shipment of the new model are progressing smoothly. ① In terms of developing a new model, the company launched the Universal H300. The first machine has been sent to the client for verification. It has completed small-batch verification of multiple processes. It is progressing smoothly, and mass production is expected in 2024. ② In terms of equipment upgrading, the company upgraded some mainstream models according to customer needs, readjusted the size layout, completed extreme size compression design adjustments and added new functions, and achieved higher levels of breakthroughs in product performance indicators such as WPH and process flexibility. ③ In terms of other new models, the Universal-150Smart, a high-yield model for third-generation semiconductor customers, is compatible with 6-8 inch polishing of various semiconductor materials and has been shipped in small batches; in addition, new models for third-generation semiconductor customers are also being actively developed and are expected to be sent to customers for verification in 2024.

(2) Thinning equipment: The all-in-one thinning and polishing machine and the all-in-one thinning and laminating machine are progressing smoothly, and the core components have been developed locally. ① Thinning and polishing all-in-one machine:

The Versatile-GP300 all-in-one thinning and polishing machine developed by the company was successfully verified on the client. After iterative upgrades, the mass-produced machine reached leading domestic and international advanced levels. Within 2023, it has obtained batch orders from leading companies in various fields, and several mass-produced machines have been sent to the client, which has been highly recognized by customers. ② 12-inch wafer thinning and coating all-in-one machine: Process development and verification have been completed, various performance indicators of the equipment have reached the expected goals, and a demo order for an integrated circuit packaging testing leader has been obtained. At the same time, the dry-polish package thinner, which was further developed, is expected to be sent to the client for verification in the first half of 2024. ③ Core components: Localized development of core components such as spindles and porous suction cups has been completed, and some have reached mass production conditions.

(3) Cutting equipment: In the first half of 2024, it was sent to a leading storage manufacturer for verification.

(4) Cleaning equipment: All types of machines have entered the verification stage. The HSC-F3400, the first 12-inch single-chip terminal cleaning machine, was sent to a leading domestic silicon wafer company for verification. The core technical indicators have met customer requirements; the cleaning machine using the front, back and edge cleaning of the 12-inch integrated circuit FEOL/BEOL wafer has been assembled and further tested at the company; the brush cleaning equipment used for 4/6/8-inch compound semiconductors has been sent to the client for verification; the equipment for 4/6/8/12 inch chip box cleaning has been delivered to the wafer reproduction line for verification.

(5) Other business: ① Liquid supply system: complete the development of new CDS products to achieve smaller size and better performance; ② Film thickness measuring equipment: film thickness measuring equipment used in metal processes such as Cu, Al, W, Co has been sent to many customers for verification, has been shipped in small batches, and some machines have passed inspection; ③ Wafer regeneration business: Currently, the wafer regeneration capacity has reached 100,000 pieces/month. By using advanced CMP grinding methods, the number of recycled wafers has been greatly increased, and has been highly recognized by customers. Import jobs , received batch orders from many large production lines and long-term stable supply; ④ Key consumables and maintenance services: On the basis of polishing head maintenance services, the company further improved the performance of 12/8/6 inch CMP multi-zone polishing heads, continued diversified development and verification of key consumables such as polishing heads, and promoted smoothly in large customer production lines.

Investment advice

The company's net profit for 2024-2026 is expected to be 973 million yuan, 1,309 million yuan, and 1,690 billion yuan respectively, up 34.42%, 34.59%, and 29.04% year-on-year respectively, corresponding to 2024-2026 PE of 28.57x, 21.23x, and 16.45x respectively.