Key points of investment
On June 24, 2024, the company won the second prize of the 2023 National Science and Technology Progress Award.
Key technologies continue to improve, breaking through many key technologies such as manufacturing electronic high-density interconnect substrates. On June 24, 2024, the project “Key Technologies and Equipment for High-Density Interconnect Packaging Manufacturing for High-Performance Chips” participated in by Xingsen Technology won the second prize of the 2023 National Science and Technology Progress Award. In the context of the post-Moore era, the importance of advanced packaging technology centered on high-density chip integration and interconnection is becoming increasingly prominent in the industrial chain. Xing Sen Technology has long in-depth industry-university-research cooperation with Guangdong University of Technology and related industries, breaking through many key technologies such as manufacturing electronic high-density interconnect substrates, forming a leading edge in the industry. The project results have been strictly certified and mass-procured by leading domestic and international companies.
Packaging substrates: CSP is entering the middle and high-end markets, and the FCBGA project is progressing steadily. In 2023, the packaging substrate business achieved revenue of 0.821 billion yuan, an increase of 19.09% over the previous year. The increase was mainly due to the CSP packaging substrate business; the gross margin was -11.83%, down 26.58 percentage points from the previous year, mainly due to the large investment in the FCBGA packaging substrate project.
CSP: On the basis of adhering to the memory chip circuit, the CSP packaging substrate business successfully entered mass production, opening up a channel for entering the middle and high-end markets. According to the company's May 2024 investor survey records, the company currently has a monthly production capacity of 0.035 million square meters of CSP packaging substrates, of which the Guangzhou factory and the Zhuhai plant have monthly production capacity of 2.0 and 15,000 square meters respectively. The Guangzhou plant achieved full production, and the capacity utilization rate of the Zhuhai plant was about 60%. In terms of downstream applications, the storage class accounts for about 70%, and other related applications such as processor chips, sensor chips, and RF chips account for about 30%. The company expects to maintain this product structure in the future.
FCBGA: In terms of production capacity, the production capacity of the first phase of the Zhuhai plant and Guangzhou plant is about 2 million pcs/month. The Zhuhai factory has passed technical ratings, system certification, and product reliability verification from some major customers. The company stated in June 2024 that small-batch mass production orders have been delivered to the Zhuhai factory. Currently, the delivery order is being packaged and tested, and no abnormalities have been found in some products that have already been sealed and tested. The Guangzhou factory is in the factory audit stage and is expected to enter mass production after completing product certification in 24Q3. In terms of yield, the yield of low-layer boards has increased to 90%, and the yield of high-rise boards has increased to more than 85%; the company expects product yield to reach the same level as leading overseas companies by the end of 2024. In terms of product capacity, the company already has mass production capacity for products with 20 layers and below. Products with 20 layers or above are in the testing stage, and have stable mass production capacity on fine routes from 50 μm to 8 μm. In terms of new technology, glass substrates, magnetic substrates, and embedded processes for multi-layer substrates are progressing in an orderly manner, and breakthroughs have been made at the core materials and production process levels.
PCB: The business expanded into high-end mobile phones and optical modules. The future will focus on digital transformation. The PCB business achieved revenue of 4.091 billion yuan in 2023, an increase of 1.50% over the previous year; the gross profit margin was 28.72%, down 1.57 percentage points from the previous year. In July 2023, the company completed the acquisition of Beijing Xingfei, achieved a breakthrough in high-end HDI board and SLP product capabilities, and expanded its business scope to high-end mobile phones and optical modules. Benefiting from the restorative growth and share increase in the high-end mobile phone business of strategic customers, Beijing Xingfei contributed 0.389 billion yuan in revenue and 0.061 billion yuan in net profit during the consolidated reporting period. Beijing Xingfei's main customers in the mobile phone sector are mainly Korean and domestic mainstream mobile phone brands. The main goal in 2024 is to increase its share of major customers and at the same time achieve product expansion in the optical module field. According to the company's April 2024 investor survey minutes, the company's traditional PCB business has no plans to expand production, and the future focus is on digital transformation.
Investment advice: As the company is in a period of high investment and the effects of scale have not been fully reflected, we have adjusted the original 24/25 performance forecast for the company. From 2024 to 2026, the company's revenue is expected to be 6.326/7.76/9.001 billion yuan (the original forecast value for 24/25 was 8.7/11.31 billion yuan), with growth rates of 18.0%/22.7%/16.0%, respectively; net profit to mother was 0.28/0.506/0.756 billion yuan (the original forecast value for 24/25 was 0.695/1.096 billion yuan), respectively, with growth rates of 32.6%/ 80.8%/49.4%; PE was 61.1/33.8/22.6, respectively.
The company's product layout covers the fields of three-level packaging such as electronic hardware wafer level, package level, and board level. The FCBGA packaging substrate project is progressing steadily, and the market space is broad. Continue to recommend and maintain the “Accumulated Holds-A” rating.
Risk warning: the risk that demand in the downstream terminal market falls short of expectations, the risk that new technology, new processes, and new products will not be industrialized as scheduled, the risk that market competition will intensify, the risk that production capacity expansion will fall short of expectations, systemic risks, etc.