Changdian Technology is the world's leading integrated circuit manufacturing and technical service provider. According to the 2023 Global Outsourcing Testing (OSAT) list published by the Chip Research Institute, Changdian Technology ranked third among the top ten OSAT manufacturers in the world and number one in mainland China. In 2023, the company achieved revenue of 29.66 billion yuan (foreign 23.25 billion yuan and domestic 6.30 billion yuan) and net profit of 1,471 billion yuan to mother. The company achieved revenue of 6.84 billion yuan (year-on-year increase of 17%) and net profit to mother of 135 million yuan (year-on-year increase of 23%) in 2024Q1.
The actual controller of China Resources Development Electronics Technology, the share transfer price is 29.00 yuan/share. Changdian Technology Shareholders' Big Fund and Semiconductor respectively signed “Share Transfer Agreements” with Panshi Hong Kong on March 26, 2024. Big Fund transferred their 174,288,926 company shares (9.74% of the company's total share capital) to Panshi Hong Kong or its related parties at a price of 29.00 yuan/share; Chip Semiconductor transferred 228,833,996 shares of the company (12.79% of the company's total share capital) to Panshi Hong Kong or its related parties at a price of 29.00 yuan/share. After this share transfer, Panshi Hong Kong or its related parties will hold 22.54% of the company's total share capital, and the controlling shareholder of the company will be changed to Panshi Hong Kong or its related party and actual controller to China Resources.
Changdian Technology's epitaxial mergers and acquisitions have grown into the top three in the world. It plans to acquire Western Digital Packaging and Testing subsidiaries to lay out the storage and testing market. Changdian Technology plans to acquire 80% of Shengdi Semiconductor's shares for US$624 million in cash. Western Digital Corporation (Western Digital), the parent company of Shengdi, is the world's leading memory manufacturer. Shengdi Semiconductor achieved revenue of 3.5 billion yuan and net profit of 360 million yuan in 2022.
The advanced packaging space is vast, and Changdian Shaoxing has an in-depth layout. According to Yole data, the global advanced packaging market is expected to reach US$72.4 billion in 2028, with an annualized compound growth rate of 8.7% between 2022 and 2028. Changdian Technology's XDFOI technology platform covers the mainstream 2.5D Chiplet solutions in the current market. They are the three technology paths using the CoWos_R rewiring layer (RDL) adapter board, the silicon adapter board CoWos_S, and the silicon bridge as the intermediary layer CoWos_L, and they all have production capacity. Changdian Shaoxing has a total investment of 8 billion yuan, and the core layout is the R&D and mass production of advanced wafer-level packaging for 300mm integrated circuits.
Profit forecast, valuation and rating: Due to weak downstream demand, we lowered the company's 2024-2025 net profit forecast to 20.80 billion yuan (-33.84%, same as the original forecast) and 30.77 (-14.31%), respectively. The forecast for the additional 2026 net profit is 3,948 billion yuan, and the current market value corresponding to 2024-2026 PE is 27x, 18x, and 14x, respectively. The company is a leader in the domestic packaging industry. The company actively develops new products and expands new customers. 24Q1 net profit increased 23.01% year on year. The quarterly net profit growth rate was corrected for the first time since 22Q4. We are optimistic about the company's future profitability and maintain the company's “buy” rating.
Risk warning: Risk of downstream demand falling short of expectations; risk of macroeconomic falling short of expectations; risk of fluctuating upstream raw material prices.