Tongfu Microelectronics released its 2024 semi-annual report: in the first half of 2024, the company achieved operating income of 11.08 billion yuan, a year-on-year increase of 11.83%; achieved net profit attributable to shareholders of listed companies of 0.323 billion yuan, turning a year-on-year loss into a profit; and realized a net profit of 0.316 billion yuan attributable to shareholders of listed companies after deducting non-recurring profits and losses, turning a year-on-year loss into profit.

Key points of investment

Revenue increased steadily, and net profit increased month-on-month

In the first half of 2024, the semiconductor industry ushered in a clear recovery trend. The company continued to seize recovery opportunities in the mobile phone and consumer markets, seize opportunities to expand market size, improve market competitiveness and production efficiency, and increase revenue steadily. 2024H1 achieved revenue of 11.08 billion yuan, a year-on-year increase of 11.83%, and net profit to mother of 0.323 billion yuan, turning a year-on-year loss into a profit. Among them, Q2 achieved revenue of 5.798 billion yuan in a single quarter, up 9.77% month-on-month; net profit to mother of 0.224 billion yuan, up 127.60% month-on-month; net profit after deducting non-attributable net profit of 0.222 billion yuan, an increase of 134.82% month-on-month.

Semiconductor warming drives packaging testing, and the company actively expands production

In the first half of 2024, the global semiconductor industry ushered in a clear recovery momentum as the consumer electronics market, such as computing and mobile devices, picked up. The company seizes the opportunity and continues to expand the market size by continuously increasing the number of products such as RF modules and communication SOC chips with system-level packaging technology. At the same time, memory, display drivers, and FC product lines have also shown strong growth momentum, maintaining rapid growth of over 50%. According to Gartner's forecast, the global AI chip market will increase by 33% to 71.3 billion US dollars in 2024. Demand for AI chips has skyrocketed, and advanced packaging production capacity has become one of the bottlenecks in AI chip shipments. The company is actively expanding production at the Penang plant in line with the requirements of leading AI customers such as AMD.

The level of R&D continues to improve, and breakthroughs in multi-process R&D achieved mass production in the first half of 2024. In the first half of 2024, the company upgraded large-size multi-chip Chiplet packaging technology and developed new processes such as corner fill and CPB to enhance chip protection, and chip reliability was further improved; the company launched FCBGA chip packaging technology based on glass core substrates and glass adapter boards to develop the demand for high-performance chips in the fields of optoelectronic communications, consumer electronics, artificial intelligence, etc.; Power side, the company completed the Easy3B module in the first half of the year R&D has begun to enter small-batch mass production; the company's 16-layer chip stacked packaging products are shipped in large quantities, and the pass rate is at the leading level in the industry; the first domestic WB split cavity shielding technology and Plasma dicing technology have entered the mass production stage.

Profit forecasting

The company's revenue for 2024-2026 is 25.851, 30.046, and 34.038 billion yuan, respectively, EPS is 0.62, 0.83, and 1.05 yuan, respectively. The current stock price corresponds to PE of 29, 22, and 17 times, respectively. As the semiconductor market recovers and the company's competitiveness increases, the company will benefit from a continuous increase in revenue and profit, and raise the investment rating to “buy.”

Risk warning

Macroeconomic risks, risk of product development falling short of expectations, risk of increased industry competition, risk of downstream demand falling short of expectations.