Description of the event

Dongwei Technology released its 2024 three-quarter report. The first three quarters of 2024 achieved revenue of 0.58 billion yuan, a year-on-year decrease of 20.68%; of these, 2024Q3 achieved revenue of 0.068 billion yuan, a year-on-year decrease of 54.12%; among them, achieved revenue of 0.188 billion yuan, a year-on-year decrease of 19.13%, or 3.67% month-on-month; and net profit of 0.013 billion yuan, a year-on-year decrease of 48.49%.

Incident comments

Due to delays in the industrialization process of composite fluid collectors, revenue performance expectations are low. The company's revenue fell 20.68% year on year in the first three quarters, mainly due to delays in the industrialization process of composite fluid collection, and demand for equipment in the new energy sector fell sharply year on year; net profit due to a sharp year-on-year decline in net profit and non-net profit in the new energy sector, mainly due to a decline in equipment revenue in the new energy sector, an increase in the price of some raw materials (such as copper, stainless steel, etc.), and an increase in the 5% VAT input tax deduction.

The PCB industry is booming, and demand for equipment orders is better. The company's PCB business covers a variety of customer needs, from ordinary circuit boards to high-end circuit boards such as AI, new energy vehicles, and computing power. Thanks to the wave of investment in PCB Southeast Asia, new development opportunities brought about by AI servers and the electrification and intelligence of automobiles, demand for high-end plate electroplating equipment has increased, and the demand for equipment has rebounded. As an industry leader, the company's customers covered almost all of China's top 100 comprehensive PCB companies in 2023, actively supported downstream customer investment, continuously strengthened its leading position in the global electroplating equipment field, and continued to strengthen the company's brand influence and core competitiveness. The company's orders this year are expected to exceed the historical peak.

Actively promote plant construction to ensure the timely release of the company's production capacity. At the beginning of 2024, the Kunshan Vacuum Division plant was completed and put into use. Currently, the coil aluminum evaporation equipment developed by the company is being tested. In the future, the plant will mainly be used to produce aluminum evaporation equipment and magnetron sputtering equipment. At the beginning of April 2024, the Kunshan New Energy Equipment Capacity Expansion Project obtained a real estate property certificate. Currently, construction of the new energy equipment capacity expansion project has begun, and there will be sufficient production capacity for new energy equipment in the future.

The industrialization of composite fluid collectors continues to advance. Composite aluminum foil has been used for loading, and orders have been converted in the market. It is expected to be applied in batches to domestic and foreign markets in the future; composite copper foil applications continue to advance, and composite copper foil is expected to gradually enter the mass production stage in the future. Against the backdrop of an upward trend in copper prices, the cost reduction advantage of composite copper foil is further highlighted, and the subsequent industrialization process is expected to accelerate. The company is the only company in the world that has achieved large-scale mass production of composite copper foil equipment. At the same time, it has an obvious first-mover advantage. At the same time, it is actively deploying composite aluminum foil equipment, and is looking forward to the subsequent release of composite copper foil equipment. At the same time, the company continues to increase investment in technology research and development, and is developing a wide range of water electroplating equipment. In addition, the company will also actively maintain close ties and communication with customers, terminal battery manufacturers, and capital markets to jointly promote the industrialization of composite fluid collectors.

The advancement of the photovoltaic copper plating process is expected to become a new profit growth point. The company actively invests in research and development of photovoltaic copper plating technology. The photovoltaic copper plating equipment has now entered the trial production stage at the customer site, and the technical specifications for electroplating have basically met the standards. In addition, the company is actively deploying photovoltaic copper plating equipment with higher production capacity, and both BC and HJT batteries are in contact with interested customers. In the future, the company will increase market development and commercialize photovoltaic copper plating equipment, which is expected to form a new profit growth point.

Maintain a “buy” rating. The PCB industry is recovering, and the company's VCP business is improving, and new products will also bring growth; the industrialization of composite fluid collectors is gradually advancing, and it is expected that new progress will be ushered in the future, and the company is expected to fully benefit as a leading manufacturer. The company's net profit due to mother in 2024-25 is estimated to be 0.15 or 0.25 billion yuan, corresponding to PE 56 or 33 times.

Risk warning

1. The expansion of downstream composite copper foil production falls short of expectations;

2. The promotion of the company's new products and new business falls short of expectations.