Incident: The company achieved revenue of 2.502 billion yuan in 2024H1, an increase of 73.69%, net profit to mother of 0.1 billion yuan, an increase of 7.21%, after deducting non-attributable net profit of 0.096 billion yuan, an increase of 4.05%. The reviews are as follows:
Net profit for the Q2 quarter was under pressure, and revenue from semiconductors and new displays increased by 98% and 219%. On a quarterly basis, the company's 2024Q1 and Q2 revenue changed +111.11% and +51.10% year-on-year respectively; net profit to mother was +37.77% and -16.35%, respectively; net profit without return to mother was +32.95% and -18.30%, respectively.
By industry, semiconductors, pan-semiconductors, new displays, life sciences, food and drug health, and other industries achieved revenue of 19.41, 2.86, 0.188, 0.043, and 0.044 billion yuan, respectively, of +98.44%, 218.62%, 38.42%, -73.29%, and -42.72%, respectively.
Gross margin declined, impairment losses increased, net interest rates declined, and the intensive execution of large projects led to a sharp increase in net operating cash outflow. The company's 2024H1 gross margin dropped 3.85 pcts to 9.50%, mainly due to increased competitive pressure in the market. The cost ratio for the period also decreased by 0.93 pcts to 2.87%, of which the sales expense ratio decreased by 0.16 pcts to 0.66%, the management cost ratio (including R&D expenses) decreased by 0.91 pcts to 2.79%, and the financial expenses ratio increased by 0.14 pcts to -0.58%. In addition, 2024H1's asset impairment and credit impairment losses were 0.029 billion yuan, an increase of 153.17%, mainly due to asset impairment losses of 0.033 billion yuan. Among them, due to the continuous expansion of business scale, the unsettled portion of the project under construction accumulated a large amount, and the company prepared 0.026 billion yuan for bad debts for contract assets and other non-current assets. Overall, the 2024H1 net margin also fell 2.47 pcts to 3.98%. The net operating cash flow outflow was 0.353 billion yuan, up 107.77% from the 2023H1 net outflow of 0.17 billion yuan (mainly due to the intensive execution of 2024H1 large-scale projects, procurement of raw materials, subcontract payments, and prepayments to suppliers, which were phased capital advances during project implementation); of these, revenue decreased by 18.02 pcts to 78.27% compared to the same period, and current payments decreased 16.05 pcts to 91.67% compared to the same period.
Additionally, 2024H1 companies' weighted average ROE decreased by 1.64 pcts to 3.53%.
There are plenty of orders in hand, and BOE's new model has won a large order; equity incentives have been granted for the first time. As of the end of June 2024, the company had orders of 2.251 billion yuan (excluding tax), of which the semiconductor and pan-semiconductors, novel displays, life science, and food, drug and health industries were 1.873, 0.186, and 0.127 billion yuan respectively, accounting for 83.20%, 8.26%, and 5.64% respectively. From July 1, 2024 to August 26, 2024, the company added orders of 1.133 billion yuan (excluding tax), including 0.197, 0.751, and 0.183 billion yuan for semiconductors and pan-semiconductors, novel displays, life science, and food, drug and health industries, respectively. Since the second half of the year, new display orders have been impressive. For example, on August 21, 2024, the company announced that it won the bid for BOE's 8.6th generation AMOLED production line project clean project (P2 section), with a bid amount of 0.713 billion yuan (tax included), accounting for about 18% of 2023 revenue. In July 2024, the company introduced an equity incentive plan. The assessment goals are:
Compared with 2023, 2024-2026 revenue increased by 12%-15%, 26%-32%, and 42%-52% respectively; net profit to mother increased by 10%-12%, 20%-25%, and 32%-40%, respectively. On July 29, 2024, the company completed the first award of equity incentives, totaling 94 people and 4.8321 million shares, accounting for 0.92% of the total share capital.
Profit forecasting and ratings. The company is the first tier of clean rooms in China. Its customers are of high quality and strong stickiness, and there are plenty of orders in hand. It benefits from domestic substitution and technological innovation in the downstream semiconductor industry, combined with equity incentives, and guaranteed performance.
We expect the company's 24-25 EPS to be 0.47 yuan and 0.55 yuan, respectively, giving 24-26 times price-earnings ratio for 24 years, and a reasonable value range of 11.20-12.13 yuan, maintaining a “superior to market” rating.
Risk warning. Downstream demand falls short of expectations, industry competition intensifies, and there is a risk of macroeconomic fluctuations.