Incidents:
On August 27, Precision Electronics released its 2024 mid-year report: 2024H1 achieved revenue of 1.121 billion yuan, up 0.96% year on year; realized net profit due to mother 0.05 billion yuan, up 312.00% year on year; realized net profit deducted from non-mother - 0.003 billion yuan, reducing losses year on year.
Investment highlights:
2024Q2's performance was impressive. 2024Q2 achieved revenue of 0.703 billion yuan, a year-on-year increase of 38.14% and a month-on-month increase of 68.18%; realized net profit to mother of 0.066 billion yuan, an increase of 30024.15% year-on-year, reversing losses month-on-month; and realized net profit deducted from mother of 0.021 billion yuan, all of which reversed losses year-on-month.
There are plenty of on-hand orders, and semiconductor revenue is rising. By business, the 2024H1 semiconductor business achieved revenue of 0.228 billion yuan, an increase of 86.17% year on year; the new energy business achieved revenue of 0.094 billion yuan, a year-on-year decrease of 59.83%; showing that the business achieved revenue of 0.776 billion yuan, an increase of 5.35% year on year. As of August 27, 2024, the company's on-hand orders were about 3.441 billion yuan, including about 1.038 billion yuan in the field of on-hand orders, about 1.767 billion yuan in the semiconductor sector, and about 0.637 billion yuan in the new energy sector. The company currently has sufficient orders in hand, laying a good foundation for steady growth in performance.
Gross margin declined slightly year-on-year, and investment in R&D continued to increase. The company's 2024H1 gross margin was 43.09%, down 0.67pct year on year, and the net margin was 3.94%, up 4.60pct year on year.
By business, the gross margin of the 2024H1 semiconductor business was 42.41%, down 6.91 pcts year on year; the gross margin of the new energy business was 32.23%, up 4.82 pcts year on year; showing that the gross margin of the business was 44.28%, down 3.56 pcts year on year. 2024Q2's gross margin was 40.76%, down 1.12 pct year on year, down 6.25 pct month on month, net margin was 11.97%, up 13.79 pct year on year, up 21.54 pct month on month. The company's expense ratio for the 2024H1 period was 50.49%, up 0.56pct year on year, of which sales expenses were 0.098 billion yuan, down 11.17% year on year; management expenses were 0.14 billion yuan, up 2.55% year on year; R&D expenses were 0.295 billion yuan, up 3.71% year on year; and financial expenses were 0.032 billion yuan, up 43.88% year on year.
Bright Field Equipment received orders for advanced manufacturing processes, and progress in the new display accelerated. 1) Flat panel display inspection business. In the field of intelligent and precision optical instruments, the company's main products are color analyzers, single-point spectrometers, spectral confocal spectrometers, imaging flickering frequency meters, imaging luminance colorimeters, AR/VR measuring instruments, etc., which have broken foreign monopolies and received repeated batch orders from domestic and foreign core customers. At this stage, the company has achieved large-scale sales. At the same time, the company has reached cooperation with top global customers and completed partial deliveries. It cooperated with top global customers on Pancake AOI optical systems and algorithms. Imported successfully.
2) Semiconductor quantity testing business. The company's 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. The remaining products, such as graphic dark field defect detection equipment, are currently in the process of R&D, certification and expansion. 3) In the new energy testing business, the company has further strengthened its in-depth cooperation with its core strategic customers in the field of lithium battery equipment. At the same time, the company's new energy overseas strategic layout has made substantial progress.
Profit forecast and investment rating We expect the company to achieve revenue of 2.979, 3.742, and 4.681 billion yuan in 2024-2026, and achieve net profit of 0.261, 0.389, and 0.543 billion yuan. The current price corresponds to PE at 57, 38, and 28 times, respectively. The company is a leading domestic flat panel display testing equipment company, and semiconductor testing equipment is being deployed at an accelerated pace to maintain a “buy” rating.
Risks suggest that the recovery of the flat panel display and semiconductor industry falls short of expectations; new product development progress falls short of expectations; risk of product technology iteration; risk of domestic replacement of semiconductor equipment falling short of expectations; increased industry competition; risk of production capacity expansion falling short of expectations; risk of high R&D investment not being converted into revenue in a timely manner; and risk of falling gross margin.