Incident: Changchuan Technology released its 2024 Q3 quarterly report: for the 2024 Q1-Q3 quarter, the company's revenue was 2.535 billion yuan, up 109.72% year on year; net profit to mother was 0.357 billion yuan, up 26858.78% year on year; net profit without return to mother was 0.345 billion yuan.

The recovery in demand in the testing machine market has driven rapid growth in the company's performance: the company mainly produces equipment such as testing machines and sorters, and its products have been used and approved by many first-class integrated circuit companies such as Changdian Technology, Huatian Technology, Tongfu Microelectronics, Silan Micro, China Resources Microelectronics, and Sun Moon Light. The sealing and testing industry is gradually picking up, and demand for equipment has picked up somewhat. Strong demand from downstream customers drove a high increase in the company's Q3 quarter results, continuing the good trend in the Q2 quarter.

Focusing on the localization of parts, gross margin has been rising steadily: the company's gross profit margin for the Q3 quarter was 57.73%, higher than the level of the Q2 and Q1 quarters, and profitability continued to strengthen. The company said that the development and rise of domestic parts is beneficial to the autonomy and control of the industrial chain, and the company attaches great importance to it; the increase in gross margin level reflects the results of the company's product structure optimization and cost reduction efforts.

Maintain high R&D investment: The company spent 0.673 billion yuan on R&D in the first three quarters, accounting for 26.53% of revenue. Adequate R&D expenses provide a reliable guarantee for the company's product innovation and key technology iteration, which is conducive to the company's long-term development and helps the company consolidate its leading position in the testing equipment industry.

Investment proposal: We expect the company to achieve operating income of 3.254/4.15/5.002 billion yuan and net profit to mother of 0.498/0.793/1.038 billion yuan in 2024-2026. The corresponding PE was 56.13/35.26/26.93 times, respectively, maintaining the “gain” rating.

Risk warning: semiconductor market sentiment is declining; overseas supply chain risks; high-end test equipment R&D progress falls short of expectations; industry competition intensifies;