Huahai Qingke released its 2024 semi-annual report. The company 24H1 achieved revenue of 1.497 billion yuan, +21.23% year over year; net profit to mother 0.433 billion yuan, +15.65% year over year; net profit after deducting non-return to mother 0.368 billion yuan, +19.77% year over year. The company achieved revenue of 0.816 billion yuan in a single quarter, +32.03% year over month, +20.00% month on month; net profit of 0.231 billion yuan, +27.89% year over month, +14.03% month on month; net profit without return to mother 0.197 billion yuan, +40.01% year on month, +14.42% month on month. We believe that the company's continued increase in revenue performance is mainly due to the expansion of downstream fab production, the company's CMP equipment process coverage and market share continued to increase, and new equipment and service business progress Good luck. As of 24H1, the company's inventory was 3.08 billion yuan, up 0.348 billion yuan from the end of Q1, and contract liabilities were 1.342 billion yuan, up 0.118 billion yuan from the end of Q1. The company was actively preparing goods and was full of orders on hand.

The process coverage of CMP equipment continues to improve, and the market share is steadily increasing. Huahai Qingke's 12-inch CMP equipment covers 14nm to 130nm processes, and can be polished to cover metal and non-metal layers. The company continues to launch new functions, modules and products that meet the requirements of more material processes and more advanced processes, and continues to promote CMP equipment development and process breakthroughs for higher performance and more advanced nodes, and its market share continues to increase. As of 24H1, the company's new CMP machine Universal H300 with its new polishing system architecture has been shipped in small batches, and client verification has been smooth; the new model for third-generation semiconductors is being met with customer needs and is expected to be sent to customers for verification in the second half of 2024.

Demand for advanced package-driven thinning and cutting equipment is strong, opening up another growth pole. According to DISCO, 24FYQ1 revenue from DISCO cutters was +75%, and +8% month-on-month, accounting for 36%, of which IC usage accounted for 67% of cutter revenue, +29pcts, +6pcts month-on-month, revenue +210%, and +20% month-on-month; thinner revenue +37%, -1% month-on-month, accounting for 26%, of which DGP (for wafer thinning) revenue was +132% month-on-month, +35% month-on-month, and IC usage accounted for +28% year-on-year, and overall IC use accounted for +28 percent year-on-year pcts, ring +8pcts, revenue +160% YoY, +14% month-on-month. Under the trend of 3D ICs and advanced packaging, there is a strong demand for thinning machines and cutting machines.

Huahai Qingke launched the GP300 in the field of thinning equipment. As a benchmark for high-end DISCO models, it has obtained batch orders from leading companies in many fields and has been highly recognized by customers. The back-end GM300 has been sent to leading domestic sealing and testing companies for verification; in terms of cutting machines, the two wafers need to be thinned a lot, and the edge is at risk of falling apart. The process requirements are clear. Currently, Huahai Qingke products have been sent to many customers for verification. We believe that based on the technology accumulation of CMP equipment, the company is leading the way in domestically produced thinning and cutting equipment, and is expected to accelerate the increase in market share.

The scale of the service business was further expanded as the installed capacity increased, and measurement and testing equipment broadened the company's product layout.

1) Service: In terms of key consumables and maintenance, Huahai Qingke disclosed that the company's 500th 12-inch chemical mechanical polishing (CMP) equipment was launched, and the company's 7-zone polishing head has independent property rights. We believe that as the company's equipment holdings increase, the maintenance business is expected to continue to grow; in the wafer recycling business, the company has greatly increased the number of times recycled wafers by adopting advanced CMP grinding methods, and has been actively expanding production; 2) Other equipment: The company has obtained long-term stable supply of equipment for film thickness measurement A leading integrated circuit manufacturer repeated orders in batches; the progress of cleaning equipment and liquid supply systems was in line with expectations.

Profit forecast and investment suggestions: We are optimistic that the company will continue to maintain its advantage in CMP equipment. Thinning & cutting equipment is expected to open up new growth poles, and achieve growth in maintenance and consumables business revenue while equipment holdings continue to increase, and equipment+service two-wheel drive growth. We expect the company to achieve operating income of 3.717/5.094/6.113 billion yuan in 2024-2026, an increase of 48%/37%/20% year-on-year, and achieve a net profit of 1.085/1.415/1.763 billion yuan, an increase of 50%/30%/25% year-on-year, and maintain the “Highly Recommended” rating.

Risk warning: Development of new technologies and products has fallen short of expectations, global trade disputes have affected, and industry competition has intensified.