Matters:

The company announced its 2024 semi-annual report. In the first half of 2024, the company achieved revenue of 1.121 billion yuan (0.96% YoY) and net profit attributable to shareholders of listed companies 0.05 billion yuan (312% YoY).

Ping An's point of view:

Continued investment in R&D and sufficient on-hand orders: in the first half of 2024, the company achieved revenue of 1.121 billion yuan (0.96% YoY) and net profit attributable to shareholders of listed companies was 0.05 billion yuan (312% YoY).

The company's overall gross margin and net margin for the first half of 2024 were 43.09% (-0.67pctYOY) and 3.94% (4.61pctYOY), respectively. In the second quarter of 2024, the company achieved revenue of 0.703 billion yuan (38.14% YoY) and net profit attributable to shareholders of listed companies of 0.066 billion yuan. Look at the business categories:

1) Display field: By continuing to maintain high R&D investment in the display field, the company continuously optimizes and adjusts the product structure, continuously improves lean production management capabilities, and increases investment in new product markets with relatively high gross margins. The 2024H1 display sector achieved sales revenue of 0.776 billion yuan, an increase of 5.35% over the previous year, of which sales revenue of 0.507 billion yuan was achieved in the second quarter, an increase of 50.28% over the previous year. 2) Semiconductor sector: With the continuous improvement of the company's technical level and increasing market recognition of the company's products, the company's semiconductor inspection business is developing rapidly, and orders and sales revenue continue to grow. 2024H1 achieved sales revenue of 0.223 billion yuan in the entire semiconductor sector, an increase of 86.17% over the previous year. 3) New energy sector: Affected by increased market competition and a slowdown in overall customer acceptance. The 2024H1 new energy sector achieved sales revenue of 0.094 billion yuan, a year-on-year decrease of 59.83%.

In terms of R&D investment: The company continued to maintain R&D investment intensity. The company invested 0.301 billion yuan in R&D in the first half of 2024, an increase of 2.62% over the same period last year (showing 0.135 billion yuan in R&D, down 6.85% year on year; R&D investment in semiconductor testing was 0.134 billion yuan, up 31.29% year on year; R&D investment in the field of new energy was 0.032 billion yuan, down 31.07% year on year). In terms of in-hand orders: As of the semi-annual report, the company has obtained a total order amount of about 3.441 billion yuan, which shows that on-hand orders in the semiconductor sector are about 1.038 billion yuan, in-hand orders in the semiconductor sector are about 1.767 billion yuan, and on-hand orders in the new energy sector are about 0.637 billion yuan. The company's semiconductor and new energy fields have become an important support for the company's business performance.

The semiconductor business is developing smoothly, and the entire semiconductor testing front and back stage layout: At present, the company has basically formed a layout in all fields of semiconductor testing. The company's subsidiary, Wuhan Jinghong, mainly focuses on the automatic test equipment (ATE) field (main products are memory chip testing equipment), aging (Burn-In) product lines, and has achieved batch repeat orders for domestic first-line customers, CP (ChipProbe, chip detection) /FT (FinalTest, final testing, that is, factory testing) products related to the product line. Order and complete delivery. The company's subsidiary Shanghai Precision Measurement mainly focuses on the field of semiconductor front-end testing equipment and is committed to the development and production of semiconductor front-end measurement and testing equipment. The equipment is used in the four major fields of silicon wafer processing, wafer manufacturing, scientific research laboratories, and third-generation semiconductors. Core products such as Shanghai precision film thickness measurement series products, OCD equipment, electron beam equipment, semiconductor silicon wafer stress measurement equipment, and brightfield optical defect detection equipment are all in a leading position in the domestic industry. Among them, film thickness series products, OCD equipment, and electron beam equipment have obtained repeated orders for advanced domestic processes; semiconductor silicon wafer stress measurement equipment has been verified and has obtained repeated orders from many leading domestic customers; brightfield optical defect detection equipment has completed delivery and acceptance of the first set, and has obtained official orders for advanced processes; and the rest of the products with reserves, such as graphic dark field defect detection equipment, are currently in the process of R&D, certification and expansion. At the same time, in order to seize the strong demand for high-performance chips brought by the rapid development of data centers, supercomputing, AI and other industries, the company actively strategically lays out advanced packaging technology, deepens strategic cooperation and binding with core customers through capital increase in Hubei Jiangcheng Laboratory Technology Service Co., Ltd., and strengthens deep integration in R&D, products, markets, etc.

Investment suggestions: On the one hand, the company is in the semiconductor testing equipment field, especially in the field of pioneering measurement, where the supply rate of domestic equipment for production lines is low, and the company is scarce; on the other hand, the company's layout in the semiconductor industry has expanded from Qiandao measurement equipment to the semiconductor manufacturing and packaging industry chain. The semiconductor sector has an on-hand order of about 1.767 billion yuan, providing important support for the company's future business performance. We maintain our profit forecast. We expect the company to achieve net profit of 0.255 billion yuan, 0.346 billion yuan, and 0.456 billion yuan in 2024-2026, corresponding to the price-earnings ratio of 57 times, 42 times, and 32 times the current stock price, respectively. Therefore, maintain the company's “Recommended” rating.

Risk warning: 1) Risk that large customers account for too much. The company's upstream panel industry is highly concentrated. If orders from the company's major customers fluctuate significantly, it will have a direct impact on the company's performance. 2) Untimely development of new products. Product technology in the panel industry is upgrading rapidly. If the company does not develop new products in a timely manner, it will not be conducive to the company's market development.

3) Downstream investment risk; the panel industry has accelerated its shift to mainland China in recent years. If major changes occur, investment in the panel industry declines or falls short of expectations, which will have a clear impact on the company's performance. 4) Semiconductor equipment technology research and development risks. The semiconductor industry has high technical content and high equipment value. The company faces the risk of large R&D investment and new product development and certification falling short of expectations