Incident Overview

The company released its 2024 mid-year report.

Etching equipment was released quickly, and new orders/shipments continued to rise. 2024H1 achieved revenue of 3.448 billion yuan, +36.46% year over year, of which Q2 revenue was 1.843 billion yuan, +41.37% year over year, better than market expectations. By product: 24H1 etching equipment achieved revenue of 2.698 billion yuan, or +56.68% year-on-year, accounting for 78.26% of revenue, +10.1pct; 24H1 MOCVD achieved revenue of 0.152 billion yuan, which was -49.04% year-on-year, mainly affected by fluctuations in the terminal market in the short term; 24H1 added 0.028 billion yuan in revenue, and the new product logic was initially realized. As of 24H1, the company's inventory and contract liabilities were 67.78 billion yuan and 2,535 billion yuan, respectively, +21.39% and +116.85%, respectively, mainly due to significant increases in the company's orders and machine production and delivery volume; 24H1 produced a total of 833 cavities of special equipment, corresponding to an output value of 6.865 billion yuan, +402% year-on-year; 24H1 received 4.7 billion yuan of new orders, +40.3% year-on-year, of which etching equipment added 3.94 billion yuan, year-on-year + 50.7%, LPCVD added 0.168 billion yuan in orders. Adequate on-hand orders supported the company's subsequent rapid revenue growth.

R&D investment increased further, and irregular profit and loss weighed down profit side performance

2024H1's net profit to mother and net profit after deduction were $517 million and 483 million, respectively, compared with -48.48% and -6.88%, respectively. Among them, Q2 net profit to mother and net profit after deduction of non-return to mother were 2.68 billion yuan and 220 million yuan, respectively, -63.23% and -24.32%, respectively, putting pressure on short-term profits. The 2024H1 net sales margin and net profit margin after deducting non-sales were 14.97% and 14.02%, respectively, compared with -24.7 and -6.52pct, respectively. The profit level declined. 1) Margin side: 24H1 gross margin of sales was 41.32%, -4.57pct year on year, a slight decrease, mainly due to accounting standards adjustments. 24H1 estimated product quality assurance loss of 0.095 billion yuan was included in operating costs, affecting gross margin about 2.75pct. In addition, we estimate that changes in product and customer structure also had a certain impact on gross margin; 2) Expense side: The cost rate for the 24H period was 26.45%, +4.64pct year on year, with sales, management, R&D and finance expenses rates -3/1.8+0.78 /+4.92/+0.77pct, the significant increase in R&D cost ratio is mainly due to increased R&D investment. 24H1 R&D investment of 0.97 billion yuan, compared with +110.84% over the same period. Currently, the research projects cover six types of equipment and the development of more than 20 new devices. 3) The sale of Tuojing Technology shares by 2023H1 generated net income of about 0.406 billion yuan after tax. 2024H1 had no related income, and non-recurring profit and loss fell sharply.

Increase research and development of product lines such as etching and thin film deposition equipment, and the platform-based layout is progressing smoothly

1) Etching equipment: We have invested heavily in the development and verification of key etching equipment in advanced processes. We have verified mass production capacity with etching ≥ 60:1 depth to width ratio structures in production lines, and actively reserve higher aspect ratio structures (≥ 90:1) etching technology. Various ICP devices are progressing smoothly in advanced logic chips, advanced DRAM, and 3D NAND production line verification and successive batch orders from customers. Wafer edge Bevel etching equipment has been developed, and the company's TSV silicon through-hole etching equipment is also increasingly being used in advanced packaging and MEMS device production. 2) Thin film deposition equipment: We have completed the verification of CVD/HAR/ALD W tungsten equipment by many logic and storage customers, and obtained customer orders. The company has recently planned a variety of CVD and ALD devices to increase the coverage of film equipment and further expand the market; EPI equipment has successfully entered the customer verification stage. 3) MOCVD: Special MOCVD equipment for micro-LED applications has been successfully developed. Prototypes have been shipped to leading domestic customers for production verification, and the next generation of MOCVD equipment for gallium nitride power device manufacturing is also being successfully developed according to plan.

Investment advice

We raised the company's 2024-2025 revenue to 8.319 billion yuan and 10.889 billion yuan respectively (the original value was 8.01 and 10.013 billion yuan), and added the 2026 revenue forecast to 14 billion yuan, with year-on-year growth rates of 32.8%, 30.9%, and 28.6% respectively; we increased net profit to mother for 2024-2025 to 1.829 and 2.404 billion yuan respectively (original values were 1.82 and 2.205 billion yuan) The net profit forecast for 2026 was 3.21 billion yuan, with year-on-year growth rates of 2.4%, 31.4%, and 33.6% respectively; due to changes in share capital, we adjusted the 2024-2025 EPS to 2.94 and 3.87 yuan (original values were 2.95 and 3.58 yuan), respectively, and the additional 2026 EPS forecast was 5.17 yuan. 2024/08/26 The stock price of 130.46 yuan corresponds to PE of 44, 34, and 25, respectively, and the investment rating was downgraded from “buy” to “increase” rating.

Risk warning

The boom in the semiconductor industry is declining, and new product development falls short of expectations, etc.