occurrences

On August 16, the company announced its 2024 semi-annual report. 24H1 achieved revenue of 1.497 billion yuan, +21.23% year over year; realized net profit attributable to mother 0.433 billion yuan, +15.65% year over year; realized net profit without deduction of 0.368 billion yuan, or +19.77% year over year.

Key points of investment

The increase in CMP market share led to revenue growth, and share payments led to slightly lower profit side growth.

24H1, the company's CMP products are one of the key process equipment for advanced integrated circuit manufacturing, and the market share continues to increase. With the expansion of the company's CMP product market holdings, the scale of businesses such as key consumables and maintenance services gradually expanded, and revenue from superimposed wafer recycling and wet processing equipment increased. The company's revenue and net profit both increased over the same period. 24H1 achieved revenue of 1.497 billion yuan, +21.23% over the same period. 24H1's share payment fee was 49.59 million yuan, and the increase in related expenses due to share payment fees was higher than the increase in revenue. 24H1 achieved net profit attributable to mother of 0.433 billion yuan, +15.65% year over year; realized net profit deducted from non-mother was 0.368 billion yuan, +19.77% year over year. The company's profitability is steady. 24H1 achieved a gross sales margin of 46.29% and a net sales margin of 28.91%. On a quarterly basis, 24Q1/24Q2 achieved revenue of 0.68/0.816 billion yuan, +10.40%/+32.03%; net profit to mother of 0.202/0.231 billion yuan, +4.27%/+27.89%; net profit without return to mother 0.172/0.197 billion yuan, +2.78%/+40.01% YoY; gross sales margin of 47.92%/44.93%; net sales margin 29.72%/28.24%. The company's operating capacity continues to increase. 24H1's net cash flow from operating activities was +38.55% compared to the same period last year, mainly due to the expansion of the company's business scale and increase in sales payback.

Platform-based development of “equipment+service”, and the development of new products and processes has been fruitful. The company continues to implement the “equipment+service” platform-based development strategy, and the transformation of scientific and technological achievements in the field of integrated circuits such as CMP/thinning/cutting/wet/measurement equipment, wafer regeneration, and consumables services has been demonstrated: 1) CMP: The company's new polishing system architecture, the CMP machine UniversalH300, has been shipped in small batches, and client verification has been smooth; the new model for third-generation semiconductors is being connected to customer needs. It is expected that 24H2 will be sent to customers for verification. 2) Thinning:

The 12-inch ultra-precision wafer thinner Versatile-GP300 has received batch orders from leading companies in many fields; the 12-inch all-in-one wafer thinning and laminating machine Versatile-GM300 has been sent to leading domestic sealing and testing companies for verification. 3) Cutting: 12-inch wafer edge cutting equipment that satisfies manufacturing processes such as integrated circuits and advanced packaging has been sent to many customers for verification. 4) Cleaning: The cleaning equipment has been used in batches for the company's wafer recycling production; 24H1, the brush cleaning equipment used for 4/6/8 inch compound semiconductors has passed the client's acceptance; the cleaning equipment used in 4/6/8/12 inch chip boxes has been ordered in small batches and is yet to be sent to the client for verification.

5) Film thickness measurement: Film thickness measurement equipment used in metal processes such as Cu, Al, W, Co, etc. has been sent to many customers for verification, and 24H1 has obtained batch repeat orders from a leading integrated circuit manufacturing company. 6) Service: The wafer recycling business has received batch orders from many large production lines and stable supply over a long period of time, and is actively promoting the process of capacity expansion. At the same time, with the increase in customer production line utilization and the company's CMP equipment holdings, key consumables maintenance and technical services are expected to become new profit growth points for the company.

Construction of a new production base and promotion of localization of parts to help implement the platform-based strategy.

In terms of production capacity construction, Huahai Qingke (Beijing), a wholly-owned subsidiary of the company, implemented the “Huahai Qingke Integrated Circuit High-end Equipment R&D and Industrialization Project” in the Beijing Economic and Technological Development Zone to help the company develop and industrialize high-end semiconductor equipment such as chemical mechanical polishing equipment, thinning equipment, wet equipment, etc., and has completed the main structure construction and is expected to be completed and accepted by the end of '24. Meanwhile, the production support project for the company's chemical mechanical polishing machine project (that is, the Tianjin Phase II project) is progressing smoothly and is expected to be completed and accepted by the end of '24. In terms of industrial layout, the company continues to promote the cultivation of domestic component suppliers, increase the localization of related component projects, and establish a wholly-owned subsidiary Huahai Qingke (Guangzhou) Semiconductor Co., Ltd. to build an incubation platform for key components of semiconductor equipment; 24H1 participated in the establishment of Huahai Gimpo Venture Capital (Jinan) partnership (limited partnership) to increase investment channels and enable the collaborative development of the main business; at the same time, the company subscribed to Hefei Qihang Hengxin Investment Fund Partnership (Limited Partnership) fund share. Expand the company's industrial layout and enhance industrial synergy.

Investment advice

We expect the company to achieve revenue of 3.5/4.6/6 billion yuan in 2024/2025/2026, and realized net profit of 1/1.3/1.7 billion yuan respectively. The current stock price corresponds to 2024-2026 PE of 30 times, 23 times, and 17 times, respectively, to maintain a “buy” rating.

Risk warning

Technological innovation risk; risk of loss or shortage of core technical personnel; risk of loss of core technology; risk of macroeconomic and industry fluctuations; risk of relative concentration of customers; risk of market development for new products and services falling short of expectations; risk of recovering accounts receivable; risk of changes in government subsidies and preferential tax policies; risk of intellectual property disputes; risk of capital raising investment projects; risk of changes in industrial policy.