Key points of investment:
Deeply involved in consumer electronics equipment, expanded high-end IC equipment, and continued to grow rapidly
Saiten Co., Ltd. was founded in 2001. Its main products are intelligent assembly and testing equipment for consumer electronics. In 2019, the company acquired Optima from Japan and officially entered the field of wafer inspection equipment, achieving a breakthrough in the high-end integrated circuit equipment market. The company's performance has grown rapidly in recent years. The CAGR of the company's operating income and net profit to mother reached 37.5% and 41.5% respectively in 2018-2023. In the first quarter of 2024, the company's operating income and net profit to mother increased by 8.3% and 30.1%, respectively.
Consumer electronics equipment: The industry is developing steadily, and new products such as AI terminals will bring structural opportunities. The global mobile device market represented by smartphones, tablets, and laptops will develop steadily. The global consumer electronics market reached 1.06 trillion US dollars in 2022, and is expected to reach 114 million US dollars in 2026, and the market is showing a steady growth trend.
With the official launch of Apple Vision Pro, attention to smart headset products has increased markedly, and leading manufacturers are actively deploying related products. It is estimated that the global VR and AR headset shipments will reach 30.1% and 96.5% CAGR respectively in 2023-2027. Folding screen phones have the advantages of a large screen and compact size, and are expected to catalyze users' switching needs. It is estimated that in 2027, global sales of folding screen phones will reach about 48.1 million units, accounting for 3.5% of total smartphone shipments. Industry leaders are entering the AI smart terminal market. It is estimated that by 2027, more than 550 million AI mobile phones will be shipped, and the penetration rate will reach 43%. New products such as smart headsets, folding screens, and AI phones are booming, which will catalyze the demand for procurement and renewal of consumer electronic equipment.
Semiconductor measurement equipment: High barriers and large space. HBM equipment is the key to ensuring the production efficiency and efficiency of IC manufacturing plants. The related equipment market is developing rapidly. The domestic semiconductor measurement equipment market is expected to reach RMB 40.58 billion in 2027, and the CAGR is expected to reach 18.9% in 2023-2027. According to Sullivan's data, the localization rate of semiconductor measurement equipment in China in 2022 was only 3%, and there is plenty of room for domestic replacement of measurement testing equipment. The company entered the field of wafer inspection equipment through the acquisition of Japan's Optima, the world's leading supplier of wafer inspection equipment. Through continuous efforts by R&D personnel, the company gradually expanded the types of semiconductor equipment, quickly opened up domestic market space, and achieved a rapid breakthrough in the future wafer equipment market. In addition, the company has improved poor monitoring of HBM and TSV process processes, obtained full recognition from customers and successfully obtained batch equipment orders, adding a new source of impetus to the continued growth of the company's semiconductor sector.
Profit forecasting and investment advice
We expect the company's net profit to be 827 million yuan, 998 million yuan, and 1,145 million yuan respectively in 2024-2026, and PE 19.4X, 16.1X, and 14.0X, respectively. Saiten shares have a high valuation and cost performance ratio, and for the first time, it covered giving Saiten shares a “buy” rating.
Risk warning
The risk of high customer concentration, risk of impairment of goodwill, and risk of downstream demand falling short of expectations.