1H24's revenue grew steadily, and R&D expenses affected net profit. New product development progressed smoothly, and Zhongke Fei Test released its semi-annual report. In 2024, H1 achieved revenue of 0.464 billion yuan (yoy +26.91%), and net profit of 68.0147 million yuan (yoy -248.05%). Among them, Q2 achieved revenue of 0.228 billion yuan (yoy +12.07%, qoq -3.07%) and net profit to mother of 0.102 billion yuan (yoy -801.72%, qoq -398.64%). Affected by changes in accounting standards and product and customer structure, 1H24 gross margin fell 5.0 pcts year over year. At the same time, the company's R&D expenses increased dramatically, and short-term profits were under pressure. The company successfully developed light and dark field nanographic wafer defect detection equipment and optical key size inspection equipment. The company launched three major software products, combining software and hardware to enhance customer stickiness. We expect the company's revenue for 24/25/26 to be 1.34/2.37/3.64 billion yuan, which is 8.5 times that of the company's 24-year PS. Considering the company's leading position and growth, a certain premium will be given to maintain the “purchase”. The target price is 81 yuan (19.3x PS in 24 years).

1H24: Revenue increased steadily, customer structure and product structure affected gross profit margin. R&D expenses increased sharply. 1H24's testing equipment revenue was 0.307 billion yuan, accounting for 66.2%, and gross profit margin 50.62%; measurement equipment revenue was 0.15 billion yuan, accounting for 32.3%, gross profit margin 36.53%. The gross margin of the 2024H1 company was 46.23%, -5.02pct year on year. The decline in gross margin was mainly due to the estimated warranty expenses for some products included in operating costs under the new accounting standards. If this effect were excluded, the gross margin for the first half of the year was 48.9%, a year-on-year decline of 2.33 pcts due to changes in customer structure and product portfolio. 1H24 R&D expenses were 0.21 billion yuan, a year-on-year increase of 114.22%, and the R&D cost ratio was 44.66%. 2Q24's revenue was 0.228 billion yuan, up 12% year on year and down 3% month-on-month, mainly due to the fact that some customer products have not yet been confirmed, and the pace of revenue confirmation is expected to resume in the third and fourth quarters. Q2 Net profit to mother - 0.1 billion yuan, mainly due to a decline in revenue but a sharp increase in R&D expenses.

Outlook: New equipment development is progressing smoothly. The combination of software and hardware capabilities has created a moat. 1) Non-graphic wafer defect inspection, three-dimensional morphology measurement, medium and metal film thickness measurement, and overlay accuracy measurement equipment, customer orders for equipment continue to grow steadily, and the market share continues to increase. Currently, development of more advanced models of equipment is progressing smoothly; 2) Brightfield nanographic wafer defect detection equipment, and optical key size measurement equipment have all been shipped to some customer production lines for process development and application verification.; 3) The company is Develop electronic beam key size measurement equipment and continue to expand market space; 4) The company launched three major software products: yield management, automatic defect classification, and lithography analysis. The combination of software and hardware enhances customer stickiness. The company covers fields such as logic, storage, 2.5/3D packaging, etc., and is optimistic about the company's growth under active downstream production expansion.

Valuation: Maintain a “buy” rating and target price of $81

Considering that the company has sufficient orders in hand, we revised the company's 24/25/26 revenue forecast to 1.34/2.37/3.64 billion yuan (previous value: 1.3/1.87/2.65 billion yuan) and maintain the “purchase”. Compared to the company's 24-year PS, it is 8.5 times higher. Considering the company's leading position and growth, a certain premium is given, and the target price of 81 yuan is maintained based on 19.3x PS for 24 years.

Risk warning: In the global semiconductor downturn cycle, demand for semiconductor equipment falls short of expectations, and industry competition intensifies.