Key points of investment

The position of the advanced packaging industry chain is becoming more prominent

According to Yole's data, the global advanced packaging market was around $37.4 billion in 2021 and is expected to grow to $65 billion in 2027. In the post-Moore era, improving chip performance by improving chip manufacturing processes is becoming more and more difficult, and advanced packaging technology, including Chiplet, will play an increasingly prominent role, improving product yield and achieving cost reduction and efficiency on the premise of ensuring performance. As a result, Europe and the US are increasing advanced packaging. In November 2023, the US Chip Act issued the first major R&D investment plan “Vision for the National Advanced Packaging Manufacturing Plan” of about 3 billion US dollars.

As a core supplier, it is expected to benefit from AMD's AI industry opportunities Since completing the settlement of 85% of AMD Suzhou and AMD Penang's shares in 2016, the company and AMD have formed a strong joint model of “joint venture+cooperation” and established a close strategic partnership. The company is AMD's largest supplier of sealing and testing, accounting for more than 80% of its total orders. The company's revenue from its largest customer has been rising steadily, from 42.97% in 2018 to 59.38% in 2023. AMD is one of the core suppliers in the computing power chip and AI PC processor industry. As the core supplier of AMD's sealing and testing process, the company is expected to benefit from the rapid development of related industries.

Comprehensive layout of advanced packaging and gradual implementation of industrialization

The company has successively obtained technical licenses from Fujitsu, Casio, and AMD, and quickly entered the field of high-end sealing and testing. Up to now, the company has worked step by step in the field of advanced packaging, achieved a comprehensive technical layout, and continuously promoted the implementation of research and development in the fields of storage, display drivers, and power semiconductors. The company's ultra-large 2D+ packaging technology, 3-dimensional stacked packaging technology, and large-size multi-chip chip last packaging technology have been verified; in terms of memory products, it has passed the customer's low-cost solution verification; in terms of SiP products, it has achieved the development and mass production of the first WB split cavity shielding technology in China.

Profit Forecasts, Valuations, and Ratings

We expect the company's revenue for 2024-2026 to be 25.846/30.664/36.057 billion yuan, respectively, with year-on-year growth rates of 16.06%/18.64%/17.59%; net profit to mother of 0.952/1.216/1.705 billion yuan, respectively, with year-on-year growth rates of 461.95%/27.75%/40.20%; 3-year CAGR of 115.91% and EPS of 0.63/0.80/1.12 yuan, respectively PE was 29/23/16 times, respectively. In view of the rapid growth rate of the company's semiconductor packaging and testing business, advanced packaging technology is leading, covered for the first time, and given a “buy” rating.

Risk warning: competition increases risk, risk of terminal demand recovery falling short of expectations, risk of international trade friction.