Description of the event

With 2024Q1, the company achieved operating income of 1,605 million yuan, +31.23% year over year, realized net profit of 249 million yuan, -9.53% year over year, and realized net profit without deduction of 263 million yuan, or +15.40% year over year.

Incident comments

The increase in etching equipment sales revenue led to overall revenue growth. The company's etching equipment continues to be recognized by more customers at home and abroad, and new shipments of high-end products with key etching processes in advanced logic and memory device manufacturing have increased significantly.

2024Q1 etching equipment achieved revenue of 1,335 billion yuan, an increase of about 64.05% over the previous year. The share of etching equipment revenue increased from 66.55% in the same period last year to 83.20% in the current period. MOCVD equipment was affected by fluctuations in the terminal market. The revenue of 2024Q1MOCVD equipment was about 38 million yuan, a year-on-year decrease of about 77.28%. Due to fluctuations in the capacity utilization rate of downstream semiconductor customers, spare parts and service revenue for the current period was approximately RMB 232 million, down about 4.38% from the same period last year.

Non-recurring profit and loss is mainly affected by changes in the value of shares held. 2024Q1's non-recurring profit and loss was a loss of $14 million, a decrease of approximately $61 million compared with profit of $48 million for the same period last year. The changes in non-recurring profit and loss are mainly due to (1) the current fair value of the company's equity investment measured at fair value decreased by about 41 million yuan due to the fall in the 2024Q1 secondary market share price; (2) government subsidy income including non-recurring profit and loss in the current period was 14 million yuan, a decrease of about 23 million yuan from 37 million yuan in the same period last year.

The increase in inventory is due to an increase in orders, an increase in production volume, and an increase in the company's procurement of raw materials. Furthermore, the increase in production machines and delivery machines to customers has also led to an increase in the number of products issued in the inventory balance. The above inventory changes are expected to support the company's long-term growth. 2024Q1's etching equipment production increased significantly. As of the end of 2024Q1, the company issued a product balance of RMB 1,923 million, an increase of RMB 1,055 million over the balance of RMB 868 million at the beginning of the period.

Etching equipment continues to be invested in research and development, and its competitiveness is outstanding in advanced chip manufacturing. The company invests in the development and verification of key etching equipment in advanced chip manufacturing technology. Currently, various devices for the most critical etching processes in logic and memory chip manufacturing have been verified on customer production lines. Wafer edge Bevel etching equipment has been developed and is about to be verified by customers. The company's TSV silicon through-hole etching equipment is also increasingly being used in advanced packaging and MEMS device production.

Through self-development+investment to form a platform-based layout, thin film equipment development has achieved remarkable results. The company has now entered the market with a number of equipment products, some of which have received repeated orders, and many other key thin film deposition equipment R&D projects are progressing smoothly. The company's tungsten series thin film deposition products can cover all tungsten applications in memory devices, and has completed verification of CVD/HAR/ALD W tungsten equipment by many logic and storage customers, and obtained customer orders. The company has recently planned a variety of CVD and ALD equipment to increase the coverage of film equipment and further expand the market.

The company is expected to achieve net profit of 20.17/26.01/3.282 billion yuan in 2024-2026, corresponding to 41/32/25 times PE, maintaining a “buy” rating.

Risk warning

1. Restrictive policies further exacerbate risks;

2. The risk that the recovery in semiconductor manufacturing boom falls short of expectations;

3. The risk that the company's etching equipment's new process verification progress falls short of expectations.