Core views

2024Q3's high revenue and profit growth has mainly benefited from the continuous expansion of market holdings of CMP products, the gradual expansion of business scale such as key consumables and maintenance services, and a gradual increase in revenue from wafer recycling and wet processing equipment. Based on “equipment+service”, the company actively promotes platformization and continues to promote breakthroughs in more advanced process nodes for CMP products. Thinning machines have received batch orders from leading customers in various fields, which is one of the company's important growth points. Furthermore, cutting, cleaning, and film thickness equipment has been repeatedly ordered or is being verified in batches, and will contribute to growth in the future.

occurrences

2024Q1-3 achieved operating income of 2.452 billion yuan, up 33.22% year on year; net profit to mother of 0.721 billion yuan, up 27.80% year on year; net profit after deducting non-return to mother 0.615 billion yuan, up 33.85% year on year.

Looking at a single quarter, 2024Q3 achieved revenue of 0.955 billion yuan, up 57.63% year on year; net profit to mother 0.288 billion yuan, up 51.74% year on year; net profit after deducting non-return to mother 0.246 billion yuan, up 62.36% year on year.

Brief review

The platform-based layout has achieved remarkable results. The high revenue and performance of 2024Q3 achieved revenue of 0.955 billion yuan in 2024Q3, an increase of 57.63% over the previous year. This is mainly due to the continuous expansion of the company's market holdings of CMP products, the gradual expansion of business scale such as key consumables and maintenance services, and a gradual increase in revenue from wafer recycling and wet processing equipment.

In terms of profitability, 2024Q3's gross profit margin was 45.08%, -1.65pct year on year. The company's gross margin fluctuation was mainly due to changes in the current inspection product structure. Due to normal fluctuations, the overall gross margin was still at a relatively steady level, and there was an improvement of 0.15 pct from month to month. On the cost side, the 2024Q3 company's cost rate for the period was 19.70%, -3.23pct. Among them, sales, management, R&D, and finance expenses were 6.13%, 4.53%, 8.86%, and 0.19%, respectively, and +1.11pct, -1.87pct, -3.52 pct, and +1.05pct, respectively. Against the backdrop of a sharp increase in revenue, the company's expense ratio has improved markedly. 2024Q3's R&D expenses reached 0.256 billion yuan, an increase of 19.54% over the previous year. The company continued to increase R&D investment to push CMP equipment towards more advanced processes, while expanding equipment such as thinning, cutting, cleaning, and measurement, and building an “equipment+service” platform-based company.

When it comes down to the profit side, 2024Q3 achieved net profit of 0.288 billion yuan, a year-on-year increase of 51.74%, and a corresponding net profit margin of 29.40%, -1.25pct; net profit without return to mother of 0.246 billion yuan, an increase of 62.36% year-on-year, and a corresponding net profit margin of 25.80%, or +0.75pct year-on-year. The company's high performance in Q3 was mainly due to ① a large year-on-year increase in revenue; ② an increase in amounts such as immediate collection and refund of the company's embedded software and tax credits; ③ a decrease in fair value changes.

Onhand orders are sufficient to support subsequent performance growth. In the context of scale expansion, cash flow improvements are clearly sufficient, and subsequent performance is supported. Benefiting from batch tenders from storage and logic customers in 2024, combined with the continuous increase in the CMP market share of the company's main business and the expansion of new products such as cleaning, thinning, and wet methods, the company's order growth was excellent since 2024. The contract debt at the end of 2024Q3 reached 1.505 billion yuan, an increase of 13.36% over the end of 2023; the inventory at the end of 2024Q3 reached 3.312 billion yuan, an increase of 37.13% over the end of 2023. Both contractual debt and inventory have reached record highs. Ongoing orders are sufficient, and subsequent performance is supported.

The expansion of business scale led to an increase in repayments, and cash flow improved markedly. The net cash flow from the company's operating activities in the first three quarters of 2024 reached 0.876 billion yuan, an increase of 136.06% over the previous year, mainly due to the expansion of the company's business scale, a significant increase in sales repayments, and an increase in the amount of immediate levies and refunds received from government subsidies and software value-added tax.

Investment advice

The company is expected to achieve operating income of 3.306, 4.498, and 5.633 billion yuan respectively in 2024-2026, with year-on-year increases of 31.84%, 36.04%, and 25.22% year-on-year net profit of 0.998, 1.366, and 1.748 billion yuan respectively, with corresponding PE increases of 37.95%, 36.86%, and 27.90%, respectively. The corresponding PE is 43.87x, 32.05x, and 25.06x 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.