Core views

2024H1's revenue grew steadily. Excellent performance in Q2 led to an increase in overall performance in the first half of the year. The company's new sales orders and shipment amounts all increased sharply year over year, and new Q2 signings also increased significantly compared to Q1, laying the foundation for subsequent revenue growth. The company continues to expand new products and processes, and continues to promote the optimization and upgrading of equipment and reaction chambers. Shipments of 2024H1 equipment have increased dramatically, and the operating performance of equipment in client production lines is stable, and we are optimistic about the revenue conversion brought about by subsequent company product line releases.

occurrences

2024H1 achieved revenue of 1.267 billion yuan, a year-on-year increase of 26.22%; net profit to mother of 0.129 billion yuan, an increase of 3.64%; after deducting non-net profit of 0.02 billion yuan, a year-on-year decrease of 69.38%.

Looking at a single quarter, 2024Q2 achieved revenue of 0.795 billion yuan, an increase of 32.22% year on year; net profit to mother of 0.119 billion yuan, up 67.43% year on year; after deducting non-net profit of 0.064 billion yuan, an increase of 40.90% year on year.

Brief review

2024Q2 performance improved significantly, with strong support for subsequent growth

Shipping terminals have successively achieved revenue conversion, and revenue has achieved steady growth. 2024H1 achieved revenue of 1.267 billion yuan, up 26.22% year on year; shipment amount was 3.249 billion yuan, up 146.50% year on year. Benefiting from the company's continuous high R&D investment, new products and processes such as ultra-high depth-to-width ratio groove filling CVD equipment, PE-ALD SiN process equipment, HDPCVD FSG, and HDPCVD STI process equipment were verified and introduced by downstream users, and the company's revenue grew steadily. The company's product layout has gradually improved, customer recognition continues to rise, and shipping platforms have successively achieved revenue conversion.

R&D and sales expenses increased, and profitability declined. In terms of profitability, 2024H1 achieved a gross profit margin of 47.05%, a year-on-year rate of -2.38pct, mainly due to early investment in new products and high costs in the yield improvement process. The profitability of the company's products is expected to rebound in the future as the company's internal operational efficiency improves. On the cost side, the total cost rate for the period was 44.83%, +4.13pct. Among them, sales, management, R&D, and finance expenses were 12.61%, 5.26%, 24.81%, and 2.15%, respectively, +1.18pct, -4.17pct, +3.88pct, and +3.24pct, respectively. The company continued to promote R&D investment. 2024H1 R&D expenses reached 0.314 billion yuan, an increase of 49.61% year on year; in order to support rapid growth in business scale and quick response to customer needs, expenses such as sales staff remuneration increased, and 2024H1 sales expenses reached 0.16 billion yuan, an increase of 39.24% year on year. When it comes down to the profit side, 2024H1 achieved net profit of 0.129 billion yuan, a year-on-year increase of 3.64%, and a single Q2 net profit of 0.119 billion yuan, an increase of 67.43% year-on-year. Excellent performance in Q2 led to overall performance growth in the first half of the year, mainly due to the dilution of expenses after rising revenue.

New orders have increased dramatically, and subsequent revenue growth has been strongly supported. The amount of new sales orders and shipments signed by 2024H1 increased significantly year over year, and new sales orders signed in Q2 also increased significantly compared to Q1. The contract debt corresponding to the advance payment reached 2.038 billion yuan at the end of the period, an increase of 47.49% over the previous year. In addition, the balance of goods issued by the company was 3.162 billion yuan, an increase of 63.50% compared to the balance of 1.934 billion yuan issued at the end of 2023, laying a good foundation for subsequent revenue growth.

New products and processes continue to expand, equipment shipments have increased dramatically, new products and new processes are continuously expanded, and the optimization and upgrading of equipment and reaction chambers continues to be promoted. The company continues to expand new products and processes, including ultra-high depth-to-width ratio groove filling CVD equipment, PECVdBianca process equipment and bonding registration accuracy measurement products, and continues to optimize and upgrade equipment platforms and reaction chambers, including new equipment platforms (PF-300Tplus and PF-300M) and new reaction chambers (pX and Supra-D). By the end of 2024H1, the company's PECVD, ALD, SACVD, HDPCVD, and ultra-high depth-to-width ratio groove-filled CVD film equipment can support about 100 kinds of process applications of all dielectric film materials required in logic chips and memory chips.

The company's equipment shipments have increased dramatically, and the equipment has been running steadily on client production lines. In the first half of 2024, the company shipped more than 430 reaction chambers; by the end of 2024H1, the company had shipped more than 1940 reaction chambers (including more than 130 new reaction chambers pX and Supra-D) and entered more than 70 production lines. According to the company's 2024 mid-year report, more than 1,000 reaction chambers are expected to be shipped throughout 2024, which is a record high. The company's equipment has excellent performance in the production and operation stability of the client production line, with an average stable operation time (uptime) of more than 90% (reaching the level of similar international equipment).

The scale of mass production and application of the company's film series products in wafer manufacturing production lines continues to expand. By the end of 2024H1, the cumulative flow volume of products produced by the company's film deposition equipment on client production lines had exceeded 0.194 billion sheets.

The fund-raising project is progressing smoothly. The Lingang ALD equipment R&D and industrialization project has been put into use. The company continues to push forward the construction of fund-raising investment projects. Currently, the three major fund-raising projects are progressing smoothly. ① ALD equipment R&D and industrialization project: Purchase a plant to build an R&D and production base in the Lingang New Area of Shanghai. By the end of 2024H1, the plant renovation had been completed and put into use, work related to ALD equipment development and production had been carried out, and the fund-raising project was completed; ② Semiconductor advanced process equipment R&D and industrialization project: build an R&D and industrialization base in the Lingang New Area of Shanghai to develop advanced semiconductor thin film deposition equipment and processes, and industrialization of semiconductor equipment required by the Lingang New Area. It is expected that the entire base will be completed by the end of 2024 Construction, to be put into use before June 2025; ③ High-end semiconductor equipment industrialization base construction project: Purchase land to build a new industrialized base in Hunnan District of Shenyang City, including production clean rooms, three-dimensional warehouses, test laboratories, etc. As of August 27, 2024, the company has completed payment for the planned land for the project.

Investment advice

The company is expected to achieve operating income of 3.947, 5.407, and 6.83 billion yuan respectively in 2024-2026, up 45.92%, 37.00%, and 26.30% year-on-year, and net profit to mother of 0.7, 1.024, and 1.404 billion yuan respectively, with year-on-year increases of 5.70%, 46.20%, and 37.14%, respectively. Corresponding PE is 48.88x, 33.44x, and 24.38x respectively, maintaining a “buy” rating.

Risk analysis

(1) Downstream production expansion falls short of expectations: The company's customers include well-known domestic and foreign manufacturers. If downstream investment and desire to expand production decrease, it will affect the company's product sales.

(2) Increased trade frictions: Increased trade frictions between China and the US may adversely affect the company's overseas customer expansion.

(3) New product development falls short of expectations: If new product development falls short of expectations, it will have a negative impact on subsequent revenue.

(4) Market competition continues to intensify: The company's competitors are internationally renowned semiconductor equipment manufacturers and emerging domestic semiconductor equipment companies. If the company is unable to effectively cope with the competitive environment in the market, it will face adverse effects such as a decline in its position in the industry.