Incident: The company released the 2023 annual report and the 2024 first quarter report. The company's revenue for the full year of 2023 was 829 million yuan, +27.07% year over year; net profit to mother was 179 million yuan, +31.28% year over year; after deducting non-net profit of 158 million yuan, +35.70% year over year. The company's Q1 revenue in 2024 was 198 million yuan, +26.26%, or -35.07% month-on-month; net profit to mother was 40 million yuan, +18.66%, and -34.68% month-on-month; realized deducted non-net profit of 37 million yuan, +33.16% year-on-year, and -41.20% month-on-month.

Promoting product system upgrading, the performance growth trend is obvious: in 2023, benefiting from high-end trends in the PCB market, the company continuously improved the technical level in the field of PCB circuit and solder mask exposure, comprehensively promoted the high-end upgrading of the company's product system, which led to a rapid increase in product market penetration rate, and the company's revenue increased 27.07% year on year, and net profit increased by 31.28% year on year. In 2023, the company's gross margin was 42.62%, -0.55pct year on year; the net profit margin was 21.63%, +0.69pct year on year. The main reasons for the decline in gross margin were the increase in the standardization of the company's products, an increase in direct material costs, a decrease in market inventory, and a decrease in the price of some carrier board equipment. In terms of expenses, the company's sales/management/R&D/finance expenses rates in 2023 were 6.78%/4.14%/11.41%/-2.27%, respectively. The year-on-year changes were +1.06/0.05/-1.58/-1.13pcts, respectively. The increase in sales expenses was mainly due to the company's increased market development efforts and increased sales personnel and marketing investment. In Q1 2024, the company achieved steady year-on-year growth in both revenue and profit. Looking at it now, the company is quite full of orders in the second quarter of this year. Whether it is domestic customers or overseas customers, this year's order expectations are better than last year. Driven by downstream customer demand, the order growth trend is quite certain.

The pan-semiconductor sector is flourishing, and on-hand orders are full: the company is flourishing in the pan-semiconductor field, deepening the application of direct writing lithography technology, speeding up its own R&D and marketing process, and maintaining a relatively rapid growth in on-hand orders. 1) In terms of carrier boards, the market has performed well, with a relatively fast year-on-year growth rate. Among them, MAS4 equipment has achieved a fine line width of 4 microns, reaching the same level as first-class overseas competitors; 2) In terms of advanced packaging, both wafer-level and panel-level equipment have layouts, which have sufficient advantages in rewiring, interconnection, intelligent correction, and application of large-area chip packaging; 3) In terms of mask plate making, LDW series mask plate making equipment that satisfies 90 nm process nodes was first launched in 2023, leading the industry in technical parameters; 4) In terms of new displays, the NEXW model is leading the industry in terms of technical parameters; 4) In terms of new displays, the NEXW model is leading the industry in terms of technical parameters. Focus on the customer The supply chain promotes market sales volume in this field; 5) In terms of new energy photovoltaics, the company actively promotes product development and industrialization verification of direct writing lithography equipment in the photovoltaic field, and continues to develop in new solar cell technology fields such as HJT/TopCon/XBC. In 2023, the company achieved pan-semiconductor business revenue of 188 million yuan, a sharp increase of nearly 97% over the previous year; in Q1, Pan-Semiconductor's revenue accounted for nearly 20%. In Q2, the company's pan-semiconductor business was saturated with orders in hand, and production capacity was at full capacity. The order delivery schedule was scheduled until June '24, and delivery pressure was high. Overall, with the launch of new semiconductor products, the company's pan-semiconductor revenue is expected to gradually increase in the next few years.

The main PCB industry has benefited significantly, and the high-end, internationalization+major customer strategy has shown results: as the scale of the domestic PCB industry continues to grow, the era of combined computing power brings demand for high-end PCB boards and ABF boards, and there is strong demand for direct imaging equipment to replace existing traditional exposure equipment. To this end, the company adheres to the following strategy: in terms of product layout, the company actively grasps the development trend of the downstream PCB manufacturing industry, focuses on high-end circuit boards such as HDI boards, large MLB boards, and IC carrier boards, continuously improves the technical level in the field of PCB circuits and solder mask exposure, and makes the product market penetration rate grow rapidly with product stability, reliability, cost performance and localized service advantages. In terms of internationalization, the company is actively building overseas sales and operation and maintenance teams to accelerate overseas market expansion. In 2022, the equipment was sold to the Japanese and Vietnamese markets, and in 2023, the company's equipment was successfully sold to regions such as Thailand, Vietnam, Japan, South Korea and Australia. The business growth was strong, and export order performance was good. In terms of customer layout, the company has increased and expanded high-quality customer resources, and coverage continues to increase. In May 2023, the company formed a strategic partnership with Japan's VTEC, and NEX60T dual-surface anti-welding DI equipment officially entered the Japanese market; in October 2023, the company and high-end PCB solution provider Shenlian Circuit reached a strategic cooperation of NT$310 million, and will carry out in-depth cooperation in technology research and development and market expansion.

The 24-25 profit forecast was lowered and raised to a “buy” rating: As a leading domestic direct writing lithography equipment, the company is expected to fully benefit from the increase in demand for high-end PCB equipment. Looking forward to next year, the pan-semiconductor business is also expected to maintain high growth, as well as the new energy photovoltaic business and overseas business as an increase in performance. In view of the uncertain customer expansion and product verification cycle for the company's advanced packaging and new technology products, the 24-25 profit forecast was lowered. At the same time, considering the company's incremental PCB overseas market support and strong growth in the pan-semiconductor business, it is expected to open up room for long-term growth in the company's performance, so it was upgraded to a “buy” rating. We estimate that in 2024-2026, the company's net profit will be 271 million yuan, 351 million yuan, and 498 million yuan, EPS will be 2.06 yuan, 2.67 yuan, and 3.79 yuan respectively, and the corresponding PE will be 29X, 23X, and 16X respectively.

Risk warning: High customer concentration risk, new technology penetration falls short of expectations, market demand falls short of expectations, and industry competition intensifies.