Matters:

The company announced its 2024 semi-annual report. In the first half of 2024, the company achieved revenue of 0.449 billion yuan, an increase of 41.04% year on year; net profit attributable to shareholders of listed companies was 0.101 billion yuan, an increase of 38.56% year on year.

Ping An's point of view:

The PCB industry was upgraded and exported to two-wheel drive, and the main business grew steadily: 2024H1, the company achieved revenue of 0.449 billion yuan (+41.04% YoY), net profit of 0.101 billion yuan (+38.56% YoY), and net profit after deducting 0.099 billion yuan (+45.84% YoY), mainly due to the company speeding up the upgrading of PCB equipment products and increasing the expansion of high-end solder mask equipment. Continuously enriching the semiconductor product matrix to promote the continuous application expansion of direct writing lithography technology Deepen. At the same time, accelerate the promotion of brand globalization development strategies and accelerate the layout of the Southeast Asian market. 2024H1, the company's overall gross margin and net margin were 41.88% (-4.17pct YoY) and 22.40% (-0.41pctYOy), respectively. It is mainly an important accounting policy change. The company reclassified 19.886 million yuan of guaranteed warranty expenses that were originally included in sales expenses during the reporting period into operating costs, leading to a reduction in gross margin. On the cost side, the 2024H1 company's cost rate for the period was 17.01% (-4.94pctYOy), with sales expenses, management expenses, financial expenses, and R&D expenses of 3.53% (-3.3pct YoY), 4.63% (+0.2pct YoY), -2.04% (-0.53pctYOy), and 10.89% (-1.30pct YoY), respectively. In the 2024Q2 single quarter, the company achieved revenue of 0.251 billion yuan (+55.37% YoY, +26.93% QoQ) and realized net profit of 0.061 billion yuan (+55.58% YoY, +53.25% QoQ). The gross margin and net margin for the Q2 single quarter were 40.32% (-7.54pct YoY, -3.54 pct QoQ) and 24.24% (+0.03pct YoY, +4.16pct QoQ).

The AI wave is driving demand for HDI boards, and the company is actively expanding the Southeast Asian market: in the PCB field: the company's equipment is mainly used in the circuit layer and solder mask exposure process in the PCB process, and the business is expanding vertically from low-level PCB markets such as single-layer boards, multi-layer boards, and flexible boards to high-end markets such as carrier boards and IC carrier boards. The AI wave continues to advance, and demand for computing power has exploded, driving demand for products such as AI servers and supporting high-end switches to continue to grow. Data center hardware has also accelerated its development in the direction of high speed and large capacity, which in turn has driven the demand for large-size, high-rise, high-frequency, high-speed, and high-heat dissipation PCB products, and has also led to an increase in PCB value. The company strengthened the product upgrade of PCB equipment from the two dimensions of R&D and production expansion, promoted a continuous increase in the market share of high-end PCB products such as multilayer boards, HDI boards, flexible boards, and IC carrier boards, and simultaneously increased production of NEX series direct writing lithography equipment in the high-end solder mask market. In May 2024, the company released the new MCD75T drilling series, which can perform real-time position calibration, real-time hole type detection, real-time energy monitoring. The alignment and compensation algorithms are compatible with LDI, improving the position accuracy of microholes and circuits. Furthermore, the overseas strategy has been one of the company's most important strategies in the past two years. The company has increased its market layout in Southeast Asia, and the Thai subsidiary has now completed registration. Currently, the company's overseas expansion is rapid, export orders are performing well, and the growth of overseas markets will continue to drive revenue growth.

The pan-semiconductor field has blossomed, and the application of direct writing lithography technology continues to deepen: in the pan-semiconductor field, the application scenarios of the company's products cover IC packaging, advanced packaging, FPD panel displays, IC mask plate making, new displays, and new energy photovoltaics, etc., and the product layout is rich. The company actively promotes cutting-edge technology research and development, accelerates new product development, launches bonding process solutions, promotes measurement and inspection technology roadmaps, actively lays out advanced packaging platform enterprises, and continues to expand multi-scenario applications of direct writing lithography equipment. 1) In terms of carrier boards, the market performance is good, and the year-on-year growth rate is relatively fast. The company has now developed MAS4, MAS6, and MAS8 series products for IC encapsulated boards. MAS4 has achieved a line width of 4 μm, reaching the level of first-class overseas competitors, and the equipment has been successfully verified on the client side. In May 2024, the company launched new IC carrier board solutions MAS6P and NEX30. 2) In terms of advanced packaging, both wafer-level and panel-level packaging equipment have layouts, which have advantages in rewiring, interconnection, intelligent correction, and application to large-area chip packaging. In addition, the company also has a layout in PLP board level packaging equipment, which supports packaging in the fields of modules, optical chips, power devices, etc.

The company is speeding up the production efficiency of packaging equipment to meet the application process on large-area chips with higher computing power and higher production efficiency and yield. 3) In terms of mask plate making, the LDW series mask plate making equipment that satisfies the 90nm process node has been successfully verified on the client side and is industry-leading in technical parameters. 4) In terms of new displays, the company is actively entering the supply chain of the leading customer BOE and strengthening the strategic layout of major customers. Currently, RTR equipment for screen sensors has been shipped to BOE, and mass production equipment for LCD process exposure coding is also about to be shipped.

Investment advice: The company has accumulated deep accumulation in direct writing lithography technology, leading the PCB direct writing lithography equipment market in China, achieving full coverage of mainstream customers. At the same time, its products also continue to expand in the pan-semiconductor field, cooperate strategically with leading customers in various segments, and maintain rapid growth in on-hand orders. We maintain the company's profit forecast. We expect the company's EPS to be 1.96 yuan, 2.75 yuan and 3.94 yuan respectively, and the PE corresponding to the closing price on August 22 will be 27.0X, 19.3X, and 13.5X respectively. As a leading domestic direct writing lithography equipment manufacturer, the company will benefit from PCB manufacturers' manufacturing trends in Southeast Asia, the growth in demand for high-end PCBs and the localization process, and the company will accelerate the layout of carrier boards, advanced packaging, new displays, mask plate making, power discrete devices, photovoltaic copper plating, etc. Further increase the breadth of the company's product line coverage, further open up room for growth, and the scale of revenue is expected to continue to expand. Maintain the company's “Recommended” rating.

Risk warning: (1) The investment of domestic PCB manufacturers falls short of expectations. If the number or progress of PCB factory investments falls short of expectations, the growth rate of equipment demand will slow down, and the company's performance growth may fall short of expectations. (2) The risk of market expansion and technology development of pan-semiconductor direct writing lithography equipment. In the field of pan-semiconductors, most of the company's direct writing lithography equipment is currently in the customer verification stage of R&D, trial production, and there is a risk that future industrial applications will be limited. (3) The risk of increased competition. In the future, if the company fails to grasp market demand and technology trends in a timely and accurate manner, and continue to launch new competitive products to meet new market demands, it will fall behind in competition and adversely affect business performance.