Key points of investment

Q2 Performance is under pressure in the short term, and I am optimistic that the special equipment business will expand one after another: in the first half of 2024, the company achieved revenue of 0.201 billion yuan, or -48.37% over the same period. The main reason is that the real estate business has entered the final stage, and real estate deliveries have declined year on year. 2024H1 achieved net profit attributable to mother of 70.8102 million yuan, which turned loss year on year; after deducting non-net profit of 7.708 million yuan, of which non-recurring profit and loss was 63.1022 million yuan, mainly due to changes in the fair value of financial assets. Q2 revenue for a single quarter was 0.102 billion yuan, -61.67%/+2.76% YoY; net profit to mother was -54.1852 million yuan, reversing the year-on-year loss.

Business restructuring led to an increase in gross margin, and R&D investment in the special equipment business increased: gross margin in the first half of 2024 was 59.77%, +10.99pct year-on-year; mainly due to business restructuring. Net sales margin was -59.73%, -82.91 pct year on year, and the cost rate for the period was 90.28%, +57.47pct year on year, of which the sales expense ratio was 5.64%, +3.75pct year on year, management expenses ratio was 56.32%, +33.75pct year on year, R&D expenses rate was 37.81%, +23.99pct year on year, financial expenses ratio was -9.49%, year-on-year -4.02pct. The company invested 0.076 billion yuan in 2024H1 R&D, +41.24% year over year, accounting for 37.81% of revenue, and continued to increase R&D investment in the semiconductor sector. Q2 gross margin in a single quarter was 42.73%, -4.28pct year over year, 34.54pct month-on-month; net sales margin was -82.66%.

Contract liabilities and inventory declined year-on-year, and the special equipment business received repeated orders from leading customers:

As of the end of 2024Q2, the company's contract liabilities were 0.182 billion yuan, or -57.23% YoY, and inventory was 1.174 billion yuan, or -1.45% YoY. Kaishitong, a subsidiary of 2024H1, and Jiaxin Semiconductor received a total of about 0.22 billion yuan in special equipment orders. The orders mainly included repeated orders from leading customers of 3 12-inch fabs and orders from 2 new customers.

Ion implantation equipment is rapidly released, and “1+N” platform-based development opens up room for growth: while stabilizing its leading position in domestic production of ion implantation equipment, the company horizontally expands equipment links such as film deposition and etching, and realizes “1+N” platform+modular development. It lays out the semiconductor equipment components field vertically based on CompartSystems, and continuously opens up room for growth. 1) Ion implanters: Casteon is full of orders, and its performance is expected to usher in rapid growth. Looking forward to the future, I am optimistic that Casteon will rapidly scale from 1 to N on the basis of achieving a breakthrough from 0 to 1. 2) Horizontal:

In 2021, the company and Ningbo Xinen jointly established Jiaxin Semiconductor, covering equipment for film deposition, etching, cleaning, heat treatment, etc., and platform-based development progressed rapidly. 3) Vertical: In December 2020, the company took the lead in acquiring Compart Systems, a global semiconductor equipment component leader, to consolidate its core competitiveness.

Profit forecast and investment rating: Considering the company's business structure, we maintain a 2024-2026 net profit of 0.21/0.27/0.33 billion yuan, respectively, and the current market value corresponds to dynamic PE of 56/43/35 times, respectively, to maintain an “increase” rating.

Risk warning: The pace of production expansion in fabs falls short of expectations, order acquisition and delivery falls short of expectations, etc.