North China Huachuang released its results report for the first three quarters of 2024. The company achieved revenue of 20.35 billion yuan in 24Q1-Q3, a year-on-year increase of 39.5%, achieved net profit of 4.46 billion yuan, a year-on-year increase of 54.7%, achieved net profit deducted from non-mother of 4.27 billion yuan, an increase of 61.6% over the previous year, and achieved a gross profit margin of 44.2%, +4.4 pcts year over year. Looking at a single quarter, 24Q3 achieved revenue of 8.02 billion yuan, a year-on-year increase of 30.1%, qoq +23.8%, and realized net profit of 1.68 billion yuan, a year-on-year increase of 55.0%, qoq +1.7%, and realized net profit without return to mother of 1.63 billion yuan, a year-on-year increase of 57.7%, qoq +3.7%, and achieved gross profit margin of 42.3%, yoy+5.9pcts, qoq-5.2pcts. The company's steady increase in revenue is mainly due to the continuous enrichment of the product matrix. The coverage and market share of equipment such as etching, thin film deposition, cleaning, furnace tubes and rapid annealing used in the field of integrated circuits continues to rise. 24Q1-Q3 electronic process equipment revenue increased 46.96% year on year. 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.

There are plenty of orders in hand, and we are actively preparing goods to meet customer needs. Judging from the inventory situation, the company's inventory amount increased from 21.13 billion yuan of 24H1 to 23.23 billion yuan at the end of 24Q3. The increase in inventory value shows that the order situation is good. The company actively prepares 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 Mafangyuan Device Base) at the end of 2023, the company's “Semiconductor Equipment Industrialization Base Phase IV Production Expansion Project” (Taima Semiconductor Equipment Base) was also completed in the first half of 2024 And put it into use.

Continue to increase investment in R&D to accelerate the equipment platformization process. The company's 24Q1-Q3 R&D expenses reached 2.192 billion yuan, up 57.8% year on year. In a single quarter, 24Q3 R&D expenses were 0.845 billion yuan, up 57.4% year on year and 35.0% month on month. The company's 24Q1-Q3 R&D expenditure rate reached 10.8%, an increase of 1.3 pcts year-on-year compared with the 23Q1-Q3 R&D expenditure rate of 9.5%. The company continues to increase R&D investment to promote the process of equipment advancement and product diversification and platform-based construction.

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.