A state-owned platform-based semiconductor equipment company that has historically been responsible for a number of major special projects

The company is a semiconductor equipment company under the Beijing State-owned Assets Administration Commission. Big Fund holds shares in both Phase I and Phase II of the Company. The company's history can be traced back to the QiOO factory, Beijing Jianzhong Machinery Factory, which was one of the first companies responsible for semiconductor equipment. In 2001, Northern Microelectronics undertook the National 863 Plan plasma etching machine project. With industrial transfers in the new energy and LED industries, domestic equipment ushered in breakthroughs.

In 2016, Qixing Electronics and Beifang Micro reorganized into Beifang Huachuang. The company has successively strengthened its products and technical capabilities through the acquisition of assets related to RF application technology from American Akrion Systems and Beiguang Technology. The management team has a background from Beijing Jianzhong Machinery Factory, with decades of experience and a balanced distribution of technical and product backgrounds.

Driven by the localization of wafer manufacturing, equipment will continue to benefit from the rise in semiconductor capital expenditure. Mainland China is the largest market for semiconductor equipment in the world, accounting for more than one-third of the front-end equipment market. Driven by localization, in 2026, mainland China will account for 25% of the world's 12-inch wafer production capacity, jumping to the number one position in the world, and wafer spending will rise. According to SEMI data, the autonomy rate of China's semiconductor industry will increase to 27%, but there is still a gap of 100 billion US dollars.

The first two phases of the Big Fund were mainly focused on manufacturing, and equipment materials accounted for relatively little. The third phase will further focus on key equipment.

Domestic substitution is gradually deepening, and platform-based companies have obvious advantages

Semiconductor equipment requires continuous high investment in R&D. Taking etching equipment as an example, etching technology requires extremely high accuracy and control at the nanoscale, making the company need to continuously invest in research and development to cope with shrinking process nodes and the application of new materials. The company maintains a high investment in R&D all year round, and is at the same level as overseas leaders. With continuous high investment in R&D, the company has continuously achieved product breakthroughs.

In recent years, the company has released a number of new products, including the 12 inch capacitively coupled plasma dielectric etcher, the Accura LX, etc. Advanced processes have higher synergy, platform-based companies have obvious advantages, and the company is continuously expanding its core layout in various downstream markets.

Investment advice

We expect the company's net profit to be 5.7, 7.9, and 11.3 billion yuan respectively in 2024-2026, and the corresponding EPS will be 11, 15, and 21 yuan respectively, corresponding to the closing price of PE on September 30, 2024 will be 34x, 25x, and 17x, respectively. Maintain the company's “buy” rating.

Risk warning

R&D progress falls short of expectations, industrial competition intensifies, and trade frictions intensify