Incident: Beifang Huachuang announced its 2024 semi-annual performance forecast. 2024H1 is expected to achieve revenue of 11.41-13.14 billion yuan, an increase of 35.4%-55.93%; net profit to mother of 2.57-2.96 billion yuan, an increase of 42.84%-64.51% year on year; and is expected to achieve net profit deducted from mother 2.44-2.81 billion yuan, an increase of 51.64-74.63% year on year.

The scale effect is prominent, focusing on a significant increase in the profitability of the main business. The company's 2024H1 performance grew rapidly, mainly due to: 1. Revenue side: The company continues to study customer needs, enrich the product matrix, and continuously improve its core competitiveness. The company's process coverage and market share of process equipment such as etching, film deposition, cleaning, furnace tubes, and rapid annealing in the field of integrated circuits continued to rise steadily, and revenue grew steadily year on year. 2. Profit side: As the scale of the company's revenue continues to expand, the scale effect gradually became apparent; intelligent manufacturing helped to effectively improve the level of operation; the cost ratio declined steadily, causing net profit attributable to shareholders of listed companies to continue to increase year-on-year.

The advantages of platformization are prominent, and new orders are plentiful, and high performance growth can be expected. The company's products cover etching, film, cleaning, heat treatment, etc. in the field of integrated circuits, and the extensive process coverage further guarantees the synergy of R&D in all aspects of the company's advanced processes. In 2023, the company's revenue for etching equipment, film deposition equipment, and vertical furnaces and cleaning equipment was nearly 60, over 60, and over 3 billion yuan respectively. It is expected that the company's share of subsequent advanced process orders will continue to increase, driving the company's profitability to continue to increase. The company continues to enhance its product competitiveness, and new orders of more than 30 billion yuan were signed in 2023, providing an effective guarantee for the company to achieve rapid growth throughout 2024.

Profit forecasting

As a leading semiconductor equipment platform company in China, with its complete product development system and high coverage of semiconductor production processes, the company is expected to deeply benefit from the semiconductor upstream cycle and domestic substitution process. It is expected that in 2024-2026, the company will achieve revenue of 30.07, 39.196, and 49.736 billion yuan, respectively, and achieve net profit of 5.734, 7.637, and 10.166 billion yuan, corresponding to PE 29.58, 22.21, 16.69x. The first coverage will give “buy” “Enter” rating.

Risk warning: Downstream demand falls short of expectations, risk of new product development falling short of expectations, and increased risk of industry competition.