Incident: The company released its 2024 semi-annual report. 2024H1, the company's revenue was 11.08 billion yuan, +11.83% year over year; net profit to mother was 0.323 billion yuan, turning a year-on-year loss into a profit; deducting non-net profit of 0.316 billion yuan, turning a year-on-year loss into a profit. The company's Q2 revenue in 2024 was 5.798 billion yuan, +10.10% year-on-month, +9.77%; net profit to mother was 0.224 billion yuan, which turned a year-on-year loss into profit, +127.60% month-on-month; after deducting non-net profit of 0.222 billion yuan, the year-on-year loss turned into a profit, +134.82% month-on-month.

The market picked up, and all businesses grew steadily, and 24H1 profitability rebounded markedly: Starting in 2024, the global semiconductor industry ushered in a clear recovery momentum. 2024H1, the company seized the recovery opportunities of the mobile phone and consumer markets, and achieved continuous revenue growth. In emerging markets, the company's SIP products such as RF modules and communication SOC chips continued to increase; production efficiency of memory, display drivers, and FC product lines maintained a growth rate of more than 50%.

In terms of profitability, 2024H1, the company's gross margin was 14.16%, +3.74pcts; the net margin was 3.30%, +5.36pcts year over year. The main reason for the significant recovery in gross margin and net margin was the increase in the company's capacity utilization rate and a marked increase in revenue growth. At the same time, the company strengthened management and cost control, and the overall efficiency improved significantly. In terms of expenses, 2024H1's sales/management/R&D/finance expenses rates were 0.31%/2.14%/6.07%/1.93%, respectively. The year-on-year changes were -0.01/-0.31/-0.13/ -3.53 pcts, respectively. The financial expenses ratio and absolute value both declined sharply, and the main cause was a sharp reduction in exchange losses.

Major engineering construction is progressing steadily, with continuous breakthroughs in technology research and development: in order to meet the company's current and future production and operation development needs and continue to enhance the company's development momentum, the company's major projects are progressing steadily. Among them, 24H1, the mechanical and electrical installation project of the first floor 2D+ project of the company's Nantong Tongfu second floor SIP construction project and the mechanical and electrical installation and renovation of the new Tongfu factory have passed the fire filing; Tongfu Chaowei Suzhou New Plant Mechatronic Installation Project, Tongfu Chaowei Penang New Plant Bump Production Line Construction Project, and the Penang New Plant Advanced Packaging Production Line Construction Project are all under construction In progress. In addition, in 24H1, the company's level of technology research and development is also constantly being refined. 1) Large-size multi-chip Chiplet packaging technology has been upgraded, and corner fill, CPB and other processes have been newly developed to enhance chip protection, and chip reliability has been further improved; 2) FCBGA chip packaging technology based on glass core substrates and glass adapter boards has now completed preliminary verification; 3) It has completed the R&D of the Y3B module and has begun mass production in small batches; 4) 16 Layer chip stacked packaging products are shipped in large quantities, and the pass rate is at the leading level in the industry; 5) The first domestic WB split cavity shielding technology and Plasma dicing technology have entered mass production.

AMD and AMD seize the growth of the AI market, and demand for high-end packaging and testing continues to be strong: 24H1, the AI chip market is growing rapidly. According to Gartner's forecast, the server AI chip market will reach 21 billion US dollars in 2024, and is expected to reach 33 billion US dollars by 2028, with a CAGR of 12%. The company's customer AMD's data center business grew more than expected, thanks to strong demand for Instinct GPUs and EPYC processors from cloud customers and enterprise customers. Among them, the MI300 GPU exceeded expectations by 1 billion US dollars in a single quarter, and AMD's data center GPU revenue this year was 4.5 billion US dollars (previous value was 4 billion US dollars). With the sharp rise in demand for AI chips, advanced packaging production capacity has become one of the bottlenecks in AI chip shipments. TSMC, Sun Moon Light, and Anjiao all indicate that advanced packaging production capacity is tight and demand for related orders is strong. In the advanced packaging market, the company continues to develop large-scale, high-computing power products in the server and client markets. Relying on years of cooperation and first-mover advantage with leading companies in the industry such as AMD, the company's high-performance packaging business maintained steady growth in the first half of the year based on the continuous growth in demand for high-end processors and AI chips. At the same time, as opportunities for innovation in the AI+ industry increase, the industrialization of artificial intelligence has entered a new stage. The company is actively expanding production at the Penang plant to meet customer needs in all aspects in line with the AI development opportunity requirements of leading customers such as AMD.

Raise profit forecasts and maintain a “buy” rating: While the overall boom in the industry recovers, the AI revolution catalyzes accelerated growth in advanced packaging. Advanced packaging technology will maintain a rapid growth trend in the next few years. The company is expected to continue to benefit from the rapid growth in the AI chip market, driving the increase in demand for advanced packaging, and the company's performance is expected to continue to grow. Considering that the AMD data center business of the company's major customer has grown beyond expectations, the company's demand for AI chip testing based on high-end processors is expected to continue to grow, superimposed on the company's 24H1 profit side quick recovery, so we raised the company's profit forecast. We expect the company's net profit to be 0.925 billion yuan, 1.271 billion yuan, and 1.578 billion yuan respectively for EPS of 0.61 yuan, 0.84 yuan, and 1.04 yuan respectively. The corresponding PE is 33X, 24X, and 19X

Risk warning: risk of industry and market fluctuations, new product expansion falling short of expectations, risk of changes in raw material prices, risk of international trade.