Key points of investment:

The collaborative development layout of equipment+materials, and intelligent solutions lead the continuous growth of performance. The company's main business products are materials used in manufacturing and processing equipment in the photovoltaic and semiconductor integrated circuit industries, as well as in the semiconductor material segment. According to the company's report for the first quarter of '24 and the annual report for '23, sales revenue of the company's equipment, services and materials accounted for 71.24% and 23.15% of the company's total revenue in 2023, with revenue up 51.29% and 186.15%, respectively; 24Q1's total revenue was 4.51 billion, up 25.28% year on year, and the performance achieved steady growth.

Photovoltaics, semiconductors, and new materials go hand in hand, and technological innovation strengthens core competitiveness. 1) The technical scale of photovoltaic equipment is leading both to achieve the layout of the entire industry chain. The company's products cover all aspects of the photovoltaic industry chain such as silicon wafers, batteries, and modules. At the same time, it launched a fifth-generation monocrystalline furnace based on N-type products in 2023 to introduce semiconductor superconducting magnetic field technology into the photovoltaic field and improve battery efficiency from the material side. The market share of this product is internationally leading. 2) Semiconductor equipment continues to innovate and break through to seize the domestic replacement market. The company actively lays out research and development of large silicon wafer manufacturing, chip manufacturing, packaging and other equipment, achieved a breakthrough in localization in the field of 8-12 inch semiconductor large silicon wafer equipment, developed a series of products such as fully automatic crystal growth equipment and crystal processing equipment, and developed various power and advanced process equipment based on the extension of the industrial chain to achieve domestic replacement for silicon carbide epitaxial equipment. 3) The scale of the new materials industry is expanding rapidly, and the localization of parts meets supply demand. In 2023, the company's expanded production capacity was gradually released, project construction gradually progressed, the production scale of quartz crucibles, tungsten wire, and silicon carbide products expanded, and the new materials industry opened up the company's second growth curve. At the same time, the company aims to localize core components for high-end semiconductor equipment, develop core components, and build large-scale production capacity.

Deeply develop high-end equipment in the field of solar energy, and export overseas to promote the expansion of high-efficiency battery technology. In 2024, Jingsheng Machine Electronics Co., Ltd. Jingsheng Photonics exported three of the latest equipment with excellent performance overseas: 1) the unique filament furnace design of PECVD equipment makes the efficiency distribution more convergent; 2) the heat field distribution in the LPCVD equipment chamber is more uniform, and the thickness uniformity of the Poly-Si deposition film exceeds the industry level; 3) the tubular low-pressure phosphorus diffusion furnace innovatively applied designs such as independent flanged water cooling, which further improved heat management and airflow control capabilities. We believe that as global demand for clean energy continues to increase in the future, the company will receive more overseas orders for battery equipment, and the expansion of overseas business is expected to drive continued growth in the company's performance.

Profit forecast and rating: We expect the company's net profit to be 5.538, 6.35, and 7.282 billion yuan respectively for 24-26, up 21.5%, 14.7%, and 14.7% year-on-year. The company is a leading enterprise in the photovoltaic semiconductor equipment industry, and its profitability remains at a high level. Refer to comparable companies that gave the company an 8-10 times PE valuation in 2024, corresponding to a reasonable value range of 33.84-42.30 yuan, giving it a “superior to the market” rating.

Risk warning: risk of downstream demand falling short of expectations; risk of industry and market competition; customer risk.