Key points of investment:
Company Overview: A scarce domestic supplier of glued imaging equipment, performance continues to grow steadily. The company was founded in 2002. After more than 20 years of technological development, the company has continuously enriched its product layout on the basis of consolidating traditional areas of advantage. Currently, it has formed four major business segments for small-sized equipment such as front-end glue-coated imaging equipment, front-end cleaning equipment, advanced back-end packaging equipment, and compounds. The company's performance continued to grow steadily in 2023, with revenue reaching 1,717 billion yuan, yoy +23.98%, net profit to mother of 250 million yuan, yoy +24.98%. Expense side R&D investment continued to increase, and R&D expenses rate of 11.52%. At the same time, the company has sufficient orders, with orders in hand of about 2.2 billion yuan (tax included) in 23 years.
Industry pattern: The boom in the semiconductor equipment industry is expected to pick up, and the scale of global semiconductor equipment continues to expand with the rise of emerging technologies such as 5G and AI. The market size declined in 2023 due to weak downstream chip cycles and excessive terminal inventory. Demand is expected to pick up in 2024. Wafer production capacity in the Chinese market continues to increase, and it is expected to dominate the list in 2026 to drive long-term demand for semiconductors. At the same time, through years of R&D accumulation, local companies have gradually broken through overseas monopolies in equipment such as glue removal, cleaning, and CMP, empowering the localization process.
Company products: Leading local gluing and imaging equipment. The product line continues to enrich the front-end glue-coated imaging business. As the only manufacturer that can currently provide mass-produced front-end gluing projectors, the company has completed full coverage of 28nm and above process nodes in the front-end wafer processing process, and can continue to iterate to a higher process level; in terms of front-end cleaning business, the company has dual coverage of “physical+chemical” cleaning. In March 2024, the company released the new Qiandao single-chip chemical cleaning machine KSCM300/200 to further improve the product line; in the field of advanced packaging, the company is deeply involved in the field of advanced packaging Over the years, the company has deployed self-developed fully automatic temporary bonding and unbonding machines in advance, and they have all entered the customer verification stage; in the field of small-sized equipment such as compounds, the company further broadened its business, entered the field of zoning, and released the fully automatic SiC crack all-in-one KS-S200-2H1L in March '24.
Profit forecasting and investment advice
We expect the company to achieve operating income of 22.9/30.3/3.92 billion yuan in 24-26, corresponding to 6/5/4 times the current PS valuation, and achieve net profit to mother of 3.0/4.7/63 billion yuan, corresponding to the current PE valuation 48/31/23 times. We believe that as a leader in localization in the field of advanced packaging, gluing and imaging equipment, the company is expected to fully benefit in the current phase of continuous industry beta implementation. Furthermore, businesses such as chemical cleaning machines, temporary bonding, and unbonding equipment are expected to contribute future growth points, so it can enjoy a certain valuation premium. First coverage, giving a “buy” rating.
Risk warning
The risk of downstream customer expansion falling short of expectations or overcapacity, the risk of a sharp increase in R&D investment, the risk of unstable supplier supply, the risk of product commercialization falling short of expectations, and the risk of increased market competition.