Event: The company released its 2024 semi-annual report. During the reporting period, the company achieved operating income of 12.335 billion yuan, an increase of 46.38% year on year; net profit attributable to shareholders of listed companies was 2.781 billion yuan, an increase of 54.54% year on year.

Comment:

Benefiting from the recovery in industry prosperity and the continued advancement of domestic substitution, the company achieved rapid year-on-year and month-on-month growth in 24Q2, and improved profitability. According to the company's semi-annual report, the company achieved revenue of 12.335 billion yuan in the first half of 2024, up 46.38% year on year, and achieved net profit of 2.781 billion yuan, up 54.54% year on year. The corresponding 24Q2 revenue was 6.476 billion yuan, up 42.15% year on year and 10.52% month on month. Net profit corresponding to 24Q2 was 1.654 billion yuan, up 36.98% year on year and 46.82% month on month. In terms of profitability, the company's gross sales margin for the first half of 2024 was 45.50%, up 3.13 percentage points from the same period last year, and the net sales margin for the first half of 2024 was 22.54%, up 0.49 percentage points from the same period last year; on a quarterly basis, the company's 24Q2 gross sales margin was 47.40%, +4.02pct year on month, and +4.00pct. The company's 24Q2 net sales margin was 25.66%, -1.62 pct year on year, +6.56 pct month on month. During the reporting period, the global semiconductor industry as a whole showed signs of recovery. The trend of recovery in the industrial chain was basically established, which in turn increased demand for upstream semiconductor equipment, and the increase in company orders led to a corresponding increase in sales volume. During the reporting period, the company continued to focus on the three core business segments of semiconductor equipment, vacuum and lithium battery equipment, and precision electronic components, and continued to maintain a leading domestic position in the field of integrated circuit equipment. Core process equipment such as etching, film deposition, furnace tubes, cleaning, and rapid annealing broke through many key technologies and achieved industrial applications. Process coverage and market share increased significantly, driving the company to achieve performance growth.

Adhere to R&D innovation-driven development and consolidate the competitive advantage of semiconductor core equipment. The company adheres to customer demand as the guide, continues to strengthen technical reserves while maintaining existing technical advantages. R&D investment is at the leading level in the domestic industry, consolidating its competitive advantage in the field of semiconductor basic products.

In the first half of 2024, the company's R&D expenses were 1.347 billion yuan (excluding capitalization expenses), an increase of 58.10% over the same period of the previous year. The R&D expenditure rate reached 10.92%, an increase of 0.81 percentage points over the same period last year. In terms of the number of patents, as of June 30, 2024, the company has applied for more than 8,300 patents and obtained more than 4,900 authorized patents, ranking first among domestic integrated circuit equipment companies. Looking forward to the future, the company will continue to increase investment in R&D, pay close attention to the development trend of cutting-edge technology, drive enterprise growth through R&D innovation, and promote the company to achieve high-quality development.

Strengthen the platform-based layout in the semiconductor equipment field and benefit deeply from domestic substitution trends in key fields. As a leading domestic pan-semiconductor equipment company, the company has a comprehensive layout in the semiconductor equipment field, covering a variety of equipment from the front stage to the back stage. In the field of semiconductor equipment, it covers most of the core equipment such as thin film deposition equipment (PVD+CVD+ALD), etching machines, oxidation furnaces, annealing furnaces, MFC, and cleaning machines. In addition to basic semiconductor equipment, the company also continues to improve its product system and expand into fields such as advanced packaging, compound semiconductors, silicon-based OLEDs, and LEDs. It is expected to successfully break overseas monopolies and benefit from domestic substitution trends in key fields.

Investment advice: The company's earnings per share from 2024 to 2025 are expected to be 11 yuan and 15 yuan, respectively, corresponding to PE of 28 times and 20 times, respectively, maintaining a “buy” rating.

Risk warning: Risk of downstream demand recovery falling short of expectations, risk of domestic substitution falling short of expectations.