The 24H1 profit side turned profit year on year, and revenue from high-end products increased significantly. Tongfu Microelectronics announced the 24H1 performance forecast. The company's 24H1 achieved net profit of 0.288-0.375 billion yuan, a year-on-year profit conversion, yoy +253.4% -299.8%; net profit after deducting non-return mother of 0.265-0.355 billion yuan, a year-on-year profit conversion, yoy+ 201.4% -235.8%.

Looking at the 24Q2 single quarter, 24Q2 revenue increased markedly year over month. The company achieved net profit of 0.19-0.277 billion yuan, yoy +199.0%-244.3%, qoq +93.9%-182.7%; net profit without return to mother 0.265-0.355 billion yuan, yoy +178.7%-220.4%, qoq +78.9%-173.7%. The profit side showed a significant year-on-month increase, mainly due to industry recovery and market demand recovery. Technologies and applications such as artificial intelligence promote the development of the industry. 24H1's capacity utilization rate increased, and revenue increased markedly. Among them, revenue from high-end products increased significantly.

Downstream demand is gradually picking up, and the operating rate is expected to increase quarterly. According to the Anjiao 24Q1 Law Conference, the company believes that the first quarter marks a low point in Amkor's revenue and utilization rate. Looking ahead to 24Q2, the company's revenue is about 1.45 billion US dollars, an increase of 6% month-on-month, which is slightly stronger than historical seasonal factors. According to the Sun Moon Light 24Q1 Law Conference, the company expects the operating rate to increase from 60% to about 70% in the second half of the year. Looking ahead to 24Q2, the company guides the revenue of the sealed testing business to increase by about 5% month-on-month, and the gross margin of the closed testing business is slightly higher than Q1. We believe that all downstream demand is gradually picking up, and the overall operating rate of the sealing and testing industry is expected to increase every quarter.

Bound to core customer AMD to benefit from the recovery of the PC market and AI dividends. According to the latest IDC data, 2024Q2 global PC shipments reached 64.9 million units, an increase of 3% year on year. The PC market has achieved two consecutive quarters of year-on-year growth, and the year-on-year increase in the second quarter was double that of the first quarter. AI PCs are injecting unlimited vitality and potential into the PC market, leading the PC market to continue to recover. AMD launched the Ryzen 7040 series in 23Q2, and will launch the 8050 series in the second half of 2024 to further enhance AI functions and drive demand for PC switches. On the GPU side, AMD released the MI300X in 2023, which has powerful performance. AMD said that the sales volume of the MI300X in 24 is expected to reach 3.5 billion dollars. The company and AMD have formed a strong joint model of “joint venture+cooperation”. It is AMD's largest sealing and testing supplier, accounting for more than 80% of its total orders. As AMD's core sealing and testing manufacturer, Tongfu Microelectronics is expected to maintain high operating rates at factories in Suzhou and Penang.

Seize industrial development opportunities and expand the advanced packaging industry map. The company has made many advances in the field of advanced packaging technology, deepening the field of mature packaging and testing technology, reducing costs and improving quality. Among them: the company's ultra-large 2D+ packaging technology, 3-dimensional stacked packaging technology, and large-size multi-chip chip last packaging technology have been verified; memory products have been verified by customers; SiP products have achieved the development and mass production of the first WB split cavity shielding technology in China; LQFP MCU has completed R&D and mass production of high-reliability automotive products, which significantly promotes revenue growth; the development of high thermal conductivity materials is smooth; in terms of testing, the industry Pioneering clip-on double pulse dynamic testing technology to achieve integration with static parameter testing. The company continues to develop new technologies and new products represented by 2D+, open up Chiplet market-based applications, strengthen in-depth cooperation with customers, and expand the advanced packaging industry. In order to maintain various advantages in packaging and testing technology, the company plans to invest a total of 4.890 billion yuan in facility construction, production equipment, IT, and technology research and development in 2024.

Profit forecast and investment advice: We expect the company to achieve revenue of 263.9/299.6/33.60 billion yuan in 2024/2025/2026, yoy +18.49%/13.53%/12.15%, achieve net profit to mother of 10.61/12.99/1,588 billion yuan, yoy +526.17%/22.48%/22.19%, maintaining the “Highly Recommended” rating.

Risk warning: Exchange rate fluctuations cause exchange losses, downstream demand falls short of expectations, and the risk of prices falling due to increased competition.