Incident: Shengmei Shanghai released its 2024 semi-annual report: 2024H1 achieved revenue of 2.404 billion yuan, a year-on-year increase of 49.33%; net profit to mother of 0.443 billion yuan, an increase of 0.85% year-on-year.

Market expansion is smooth, and the 2024 revenue forecast was raised: The company has made significant progress in business expansion in domestic and foreign markets. By strengthening cooperative relationships with existing customers and developing new customers, it has successfully obtained many important orders. These orders have laid a solid foundation for annual revenue, so the company adjusted the revenue forecast range for the full year 2024 to between 5.3 billion yuan and 5.88 billion yuan, up from the previous forecast range of 5-5.8 billion yuan.

Equity incentive costs affect short-term profits: Due to the implementation of the restricted stock incentive plan in 2023, the company's 2024H1 share payment fee was 0.153 billion yuan, a significant increase compared to the same period last year, which affected the company's profit level to a certain extent. As the scale of the company's revenue and profit continues to expand, the impact of share payment fees is expected to gradually decrease.

The new product market is expanding smoothly: In order to further expand the process coverage of integrated circuit manufacturing, the company has launched a variety of new equipment and new processes in recent years. Among them, the Ultra pMaxTM plasma enhanced chemical vapor deposition (PECVD) device is about to deliver its first PECVD device to an integrated circuit customer in China. Two new product lines, this device and Ultra Lith, the advanced glue-coated imaging device, will double the size of the company's global serviceable market

Investment advice: The company is a leading domestic cleaning equipment company. We expect the company to achieve operating income of 5.515/6.995/8.425 billion yuan and net profit of 1.14/1.616/1.946 billion yuan in 2024-2026. The corresponding PE was 36.95/26.08/21.65 times, respectively, maintaining the “gain” rating.

Risk warning: Domestic fab equipment procurement is slowing down; new product development progress falls short of expectations; industry competition intensifies.