Incident: The company released its 2024 semi-annual report. In 2024, H1 achieved operating income of 0.757 billion yuan, +16.17% year over year; net profit to mother 0.093 billion yuan, +20.64% year over year; net profit after deducting non-return to mother 0.086 billion yuan, +27.08% year over year. Among them, the company achieved revenue of 0.484 billion yuan in Q2 of 2024, +25.98%; net profit attributable to mother and net profit of 0.057/0.056 billion yuan after deduction, respectively, and +32.39%/+40.96% year-on-year.

Focus on ultra-clean semiconductor plants and continue to explore downstream application areas.

The company's main business focuses on ultra-clean semiconductor plants, and its products cover well-known semiconductor companies at home and abroad. Currently, the company relies on semiconductor ultra-clean technology to further expand the application targets of its products and services to leading domestic and foreign companies such as GMP biopharmaceuticals, photovoltaics, and new energy. In addition, the company continues to maintain market share in the field of indoor air quality optimization and is actively expanding the air product emission control business. Considering that the company's filter products have “consumable properties” and need to be replaced after reaching resistance saturation or after some equipment is aging, the company is also actively expanding the stock replacement market on the basis of continuing to expand the downstream application field of the product. While meeting customers' replacement needs for non-newly built factories, the company also obtains continuous orders to ensure performance development.

The acquisition of certification and the expansion of production capacity for two-wheel drive have achieved remarkable results in expanding overseas markets.

In recent years, the company has actively expanded overseas markets. Previously, the company had begun to obtain an overseas certification system in the early stages of market development. Its main products have now obtained qualified supplier certifications from many famous international manufacturers, such as semiconductor chip manufacturers, new energy manufacturers, photovoltaic manufacturers, air conditioning manufacturers, etc. Looking at the overseas layout area, the company's overseas customers are mainly distributed in Southeast Asia. Currently, it is entering the core international customer supply chain at an accelerated pace, and sales business in Europe, the Middle East and other regions continues to grow. At the same time, the company is also actively expanding overseas production capacity. By the time of disclosure in the interim report, the two new plants purchased by the company overseas had already been put into production, and overseas production capacity is expected to increase to 0.2 billion yuan after the production capacity climb is completed. Under the two-wheel drive introduced by customers and expanded production, the company's overseas market expansion results were remarkable. In 2024 H1, the company's overseas revenue reached 0.14 billion yuan, a significant increase of 85.77% over the previous year.

Profitability is increasing steadily, and R&D investment continues to increase.

In 2024 H1, the company's gross sales margin and net sales margin were 29.60% and 12.19%, respectively, up 1.92 and 0.41 pcts year-on-year, respectively, and profitability increased steadily. On the cost side, H1's sales/management/finance/R&D expenses in 2024 were 0.48/0.04/0.004/0.036 billion yuan respectively, with year-on-year changes of +4.69%/+52.93%/-0.71%/+16.02%. Among them, the sharp increase in management expenses was mainly due to meeting the company's business development needs. Land and software integration systems purchased at the end of last year generated amortization expenses in the current period; in addition, the company continued to increase investment in R&D. As of June 2024, the company's product technical indicators and authorized The number of patents and the proportion of R&D personnel lead the industry, providing a solid foundation for the company's long-term sustainable development.

Profit forecast: The company is a leading localized enterprise for clean equipment (fan filter units) and consumables (filters) in the semiconductor field. As the company continues to expand downstream applications and overseas markets, we predict that the company's future performance is expected to achieve steady growth. Net profit of 0.231, 0.294, and 0.368 billion yuan will be achieved in 2024-2026, respectively, and corresponding PE is 15.07, 11.83, and 9.46 times, respectively. Give the company a “buy” rating.

Risk warning: the risk of downstream demand falling short of expectations, the risk of a sharp rise in raw material prices, the risk of production capacity expansion falling short of expectations, and the risk of overseas market expansion falling short of expectations.