North China Huachuang announced its results forecast for the first three quarters of 2024. In 24Q1-Q3, the company expects to achieve median revenue of 20.26 billion yuan, a year-on-year increase of 38.8%, achieve a median net profit of 4.44 billion yuan, an increase of 53.9% year-on-year, and achieve a median net profit of 4.25 billion yuan after deducting non-return to mother, an increase of 60.8% year-on-year. Looking at a single quarter, 24Q3 achieved revenue of 7.98 billion yuan, a year-on-year increase of 29.5%, qoq +23.2%, and realized net profit of 1.68 billion yuan, a year-on-year increase of 54.4% and qoq +1.3%, achieving net profit without deduction of 1.62 billion yuan, a year-on-year increase of 56.7% and qoq +3.0%. The company's steady increase in revenue is mainly due to the continuous enrichment of the product matrix, and the coverage and market share of equipment processes such as etching, film deposition, cleaning, furnace tubes, and rapid annealing used in the field of integrated circuits continues to rise. The increase in profitability is mainly due to an increase in the scale of revenue, prominent scale effects, intelligent manufacturing has helped improve the company's operating level, and cost control has been continuously strengthened.

Equity incentives demonstrate confidence in long-term development. On October 14, 2024, the company held the 16th meeting of the 8th board of directors and the 11th meeting of the 8th board of supervisors to review and pass the “Proposal on Adjusting the List of Incentive Recipients of the Company's 2024 Stock Option Incentive Plan” and the “Proposal on Granting Stock Options to 2024 Stock Option Incentive Program Incentive Recipients”. It was determined that October 14, 2024 was the grant date, and 9154,300 stock options were granted to 2007 incentive recipients at a price of 190.59 yuan/share. The enthusiasm of employees also shows the company's confidence in long-term development.

Contract debt increased year-on-year, and on-hand orders were plentiful. As of 24H1, North China Huachuang's contract debt reached 8.99 billion yuan, an increase of 0.67 billion yuan compared with the end of 2023. Judging from the inventory situation, the company's inventory amount increased from 16.99 billion yuan at the end of 2023 to 21.13 billion yuan at the end of 24H1. Contract debt and inventory increased, and the company was full of orders on hand. At the same time, the company is actively preparing goods to ensure smooth supply, and the company continues to expand production capacity. Following the successful commissioning of the “High Precision Electronic Components Industrialization Base Phase III Production Expansion Project” (Pinggu Mafang Components Base) at the end of 2023, the company's “Semiconductor Equipment Industrialization Base Phase IV Expansion Project” (Taiwan and Malaysia Semiconductor Equipment Base) was also completed and put into use in the first half of 2024.

Profit forecast and investment advice: We expect the company to achieve operating income of 30.94/40.93/51.16 billion yuan in 2024/2025/2026, up 40.1%/32.3%/25.0% year on year, and achieve net profit to mother of 5.75/8.1/10.07 billion yuan, up 47.5%/40.9%/24.3% year on year. As a leader in semiconductor equipment, Beifang Huachuang maintains a “Highly Recommended” rating.

Risk warning: New technology and product development progress falls short of expectations; impact of global trade disputes; intensification of industry competition.