2024Q3 performance continues to increase: The company expects revenue of 18.83-21.68 billion yuan and net profit of 4.13-4.75 billion yuan in the first three quarters of 2024, an increase of 43.19%-64.69% year-on-year, after deducting non-net profit of 3.95-4.54 billion yuan, an increase of 49.62%-71.97% year-on-year. 2024Q3 achieved revenue of 7.42-8.54 billion yuan, up 20.42%-38.60% year on year, median revenue of 7.98 billion yuan, +29.51% year on year; net profit to mother of 1.56-1.79 billion yuan, up 43.78%-64.98% year on year, median net profit of 1.675 billion yuan, +54.38%/month on month +1.27%; net profit of 1.5-1.73 billion yuan year-on-year increase 45.49%-67.80%, the median value of net profit after deducting non-net profit was 1.615 billion yuan, +56.65% YoY +3.04%. Thanks to the continuous expansion of the company's process coverage of process equipment such as etching, film deposition, cleaning, furnace tubes, annealing, etc., a steady rise in market share, and continuous improvement in operating efficiency, performance has grown rapidly. Looking at the whole year, as the scale of the company's revenue expands and the advantages of the platform gradually become apparent, the company's performance is expected to continue to increase year-on-year.

Q3 Profitability improved year-on-year, and the month-on-month decline was mainly due to an increase in R&D expenses: the net interest rate corresponding to the median value of the 2024Q3 company's revenue and net profit forecast was 20.99%, +3.38 pct/month-on-month -4.55pct; the deducted non-net interest rate corresponding to the median value of revenue and non-net profit forecast was 20.24%, +3.51 pct/month-on-month -3.97 pct. We believe that the month-on-month decline in net interest rates is mainly due to an increase in R&D expenses in Q3, a decrease in R&D capitalization rate, and small fluctuations in gross margin.

Local semiconductor equipment platform companies will benefit from the wave of domestic substitution for a long time: 1) Etching equipment: for 12-inch logic, storage, power, advanced packaging and other customers, to achieve full coverage of silicon and metal media etching processes. 2) Thin film deposition equipment: Breaking through many core technologies such as PVD, CVD, and ALD, more than 20 products such as copper-connected film deposition and aluminum film deposition have become preferred machines for mainstream domestic chip manufacturers. 3) Vertical furnaces: Medium temperature oxidation/annealing furnaces, high temperature oxidation/annealing furnaces, low pressure chemical vapor deposition furnaces, and batch atomic layer deposition furnaces have all become mass production equipment for mainstream domestic customers, and continue to receive repeated orders. 4) Epitaxial furnace:

It covers more than 20 mass-production equipment, including SiC epitaxial furnaces, silicon-based GaN epitaxial furnaces, and 6/8-inch multi-chip silicon epitaxial furnaces. 5) Cleaning machine: The single-chip cleaning machine covers the entire Al/Cu process and is the preferred machine for back-end processes by mainstream domestic manufacturers; trough cleaning machines have been mass-produced by many clients and have received repeated orders.

Profit forecast and investment rating: Considering the company's order situation, we maintain the company's net profit forecast for 2024-2026 at 5.6/7.3/9.2 billion yuan, respectively. The current market value corresponds to dynamic PE of 35/27/21 times, respectively. Maintains a “buy” rating based on the company's high growth.

Risk warning: Downstream production expansion falls short of expectations, and new product expansion falls short of expectations.