Core views
AI enhances the demand for advanced packaging, and the company has a solid foundation and strong strength. We believe that as demand for computing power chips rises, the status of advanced packaging is becoming more and more obvious in the current situation where advanced manufacturing processes are progressing slowly. We believe that judging from the technical reserves, Yongsi Electronics has laid a solid foundation for the subsequent development of 2.5/3D packaging technology. In 2023, Yongsi Electronics achieved breakthroughs in the field of large FCBGA, Bumping (convex) and RDL (heavy wiring). Specifically, in the field of flip chips, the company has high-precision inverted mounting technology and successfully developed fine-pitch flip chip bottom molding and underfill filling technology, advanced process wafer low dielectric constant layer stress simulation technology, and the introduction of high thermal conductivity metal interface material packaging and cooling technology; 2) The company has high-density micro-bump technology and micron-level fine line width multi-width technology to achieve multiple RDD L wiring layer Bumping is mass-produced and lays the process foundation for subsequent Fan-out (fan-out packaging).
24Q1 revenue increased significantly year-on-year, and is expected to maintain rapid growth throughout the year. In the first quarter of 2024, the company's revenue scale increased dramatically. Due to the expansion of revenue scale, the scale effect was gradually reflected, and gross margin increased year-on-year. Thanks to the recovery in prosperity in the fields of some customers, the expansion of new customers, and the increase in the share of some of the original customers, the company's 24Q1 revenue increased rapidly, and remained optimistic about the revenue growth trend in the second quarter. In terms of products, the company's SiP, QFN/DFN, and FC revenue increased year-on-year, and MEMS revenue declined sharply. We believe that the company may pay more attention to high-end packaging products in the future, which will help raise profit levels. The company issued a restricted stock incentive plan in 2023 and set a 100% equity incentive ownership assessment target of at least 50% revenue growth in 2024 compared to 2022.
The production capacity of the Phase II project is about to be released, and profitability is expected to continue to improve. The company's second-phase layout mainly includes Bumping, wafer-level packaging, flip products, and some vehicle and industrial product lines. We believe production capacity may be gradually released in 2024. With the delivery of the second phase of the plant and the implementation of the Bumping project, the process foundation has been laid for the company to further develop 2.5D/3D packaging. It is expected to be launched in the second half of 2024 and will have the capacity to produce 2.5D packaging in small batches. The second phase of the project is expected to have an annual sales capacity of 8 billion yuan after delivery. We believe that the second phase of the project may further increase the company's revenue scale after delivery. As the scale effect gradually becomes apparent, the company's profitability may continue to improve.
Profit forecasting and investment advice
The first coverage gives a “buy” rating. We expect the company's net profit to be 0.028, 0.152, and 0.25 billion yuan respectively in 2024-2026, with corresponding EPS of 0.07, 0.37, and 0.61 yuan respectively. As of June 27, the 2024-2026 PE values corresponding to the closing price were 291.70, 54.31, and 32.92 times, respectively. We are optimistic that the company will usher in an increase in operating rate after the recovery of the semiconductor cycle. At the same time, it will benefit from the acceleration of domestic substitution and a rapid increase in market share from its own technical advantages, and further open up room for growth through the active introduction of advanced process packaging products.
Risk warning
The semiconductor cycle fluctuates, domestic substitution falls short of expectations, and the development of new technology falls short of expectations.