Core views

2024Q3 achieved revenue of 2.059 billion yuan, a year-on-year increase of 35.96%. The sales performance of etching equipment was excellent. The company's revenue grew steadily. The gross margin declined slightly year-on-year due to the product sales structure, and the company achieved a high increase in performance in the context of cost-side improvements combined with equity investment income correction. In the first three quarters of 2024, the company performed well in new and ongoing orders. Orders for etching equipment increased significantly, and new shipments of high-end products increased significantly. At the same time, the new LPCVD product began to be launched. I am optimistic about the company's platform-based layout around the two key aspects of etching and film, and I look forward to the progress of client verification of the new product.

occurrences

In the first three quarters of 2024, the company achieved operating income of 5.507 billion yuan, a year-on-year increase of 36.27%; net profit to mother was 0.913 billion yuan, a year-on-year decrease of 21.28%; net profit after deducting non-return to mother was 0.813 billion yuan, an increase of 10.88% year-on-year.

Looking at a single quarter, 2024Q3 achieved operating income of 2.059 billion yuan, up 35.96% year on year; net profit to mother 0.396 billion yuan, up 152.63% year on year; net profit after deducting non-return to mother 0.33 billion yuan, up 53.79% year on year.

Brief review

2024Q3 revenue increased dramatically, and gross margin was under pressure due to high verification costs for new products

The sales performance of etching equipment was excellent, and the company's revenue grew steadily. In the first three quarters of 2024, the company achieved revenue of 5.507 billion yuan, up 36.27% year on year, of which etching equipment revenue reached 4.413 billion yuan, an increase of about 53.77% year on year. 2024Q3 achieved revenue of 2.059 billion yuan, a year-on-year increase of 35.96%, of which etching equipment revenue reached 1.715 billion yuan, an increase of 49.41% year-on-year.

Investment in R&D has been significantly increased, and the overall cost ratio has improved. In terms of profitability, the company's gross margin reached 43.73% in 2024Q3, -2.01pct year on year, mainly due to differences in sales product structure in a single quarter. On the cost side, the total cost rate for the 2024Q3 company during the period was 27.85%, -0.56pct. Among them, sales, management, R&D, and finance expenses were 5.67%, 5.81%, 16.81%, and -0.44%, respectively. The year-on-year ratio was -3.81 pct, +0.27pct, +2.91 pct, and +0.07pct, respectively. The decrease in the sales expense ratio led to an overall improvement in the cost rate during the period.

In 2024, the company significantly increased its R&D efforts to expand future sales categories and lay a good foundation for continued growth. 2024Q3's R&D expenses reached 0.914 billion yuan, an increase of about 64.38% over the previous year.

When it comes down to the profit side, 2024Q3 achieved net profit of 0.396 billion yuan, a year-on-year increase of 152.63%, corresponding to a net interest rate of 19.24%, +8.89pct year-on-year; net profit without return to mother of 0.33 billion yuan, an increase of 53.79% year-on-year, and a corresponding net interest rate of 16.04%, or +1.86pct year-on-year. The increase in net profit attributable to mother was much higher than net profit after deducting non-recurrent profit and loss in 2024Q3, which was 0.081 billion yuan, an increase of 0.183 billion yuan over the loss of 0.102 billion yuan in the same period in 2023.

The performance of new and ongoing orders is excellent, and various devices have progressed significantly under the platform-based layout

There was a high increase in new and active orders, and strong performance support. Orders of 7.64 billion yuan were added in the first three quarters of 2024, about +52.0% year on year. Among them, orders for etching equipment were added 6.25 billion yuan, about +54.7% year on year; orders for the new LPCVD product were added 0.3 billion yuan, and sales began. According to customer order requirements, the company produced 1,160 cavities of special equipment in the first three quarters of 2024, an increase of about 310% over the previous year. The corresponding output value was about 9.419 billion yuan, an increase of about 287% over the previous year. At the end of 2024Q3, the company's contract debt was 2.988 billion yuan, up 287.25% from the end of 2023; inventory was 7.822 billion yuan, up 83.59% from the end of 2023; the balance of issued goods was about 3.507 billion yuan, an increase of about 304.03% over the end of 2023. There were sufficient orders in hand, and performance support was strong.

Shipments of new high-end etching products have increased significantly, and the volume of new LPCVD products has been launched. ① Etching equipment: New shipments of high-end products have increased significantly, with mass production of key etching processes in the middle of advanced logic devices and ultra-high depth-to-width etching processes for advanced memory devices; ② MOCVD: The company actively lays out the silicon carbide and gallium nitride-based power device application markets, and has made good progress in the development of specialized MOCVD equipment for micro-LED and other display fields. Several new MOCVD products that have already been shipped and are about to be shipped have entered the market; ③ LPCVD: New products achieved first sales, with revenue of 0.028 in the first three quarters of 2024 Million yuan, starting volume; ④ EPI: It has successfully entered the client mass production verification stage, completed process verification for many advanced logic devices and MTM device customers, and the results have been highly recognized by customers.

Investment advice

The company is expected to achieve operating income of 8.34, 11.421, and 14.976 billion yuan respectively in 2024-2026, up 33.15%, 36.94%, and 31.12%, respectively. Net profit to mother is 1.392, 2.395, and 3.327 billion yuan respectively, up -22.05%, 72.06%, and 38.89% year-on-year respectively. Corresponding PE is 80.97x, 47.06x, and 33.88x respectively, maintaining the “buy” rating.

Risk analysis

(1) Downstream production expansion falls short of expectations: The company's business is strongly correlated with the capital expenses of downstream semiconductor Fab customers. If downstream investment and desire to expand production decrease, it will affect the company's product sales.

(2) Increased trade frictions: Increased trade frictions between China and the US may adversely affect the company's preparation of key components.

(3) New product development falls short of expectations: If new product development falls short of expectations, it will have a negative impact on subsequent revenue.

(4) Market competition continues to intensify: The company's competitors are internationally renowned semiconductor equipment manufacturers and emerging domestic semiconductor equipment companies. If the company is unable to effectively cope with the competitive environment in the market, it will face adverse effects such as a decline in its position in the industry.