Core views

Demand for equipment in China's semiconductor industry continues to be strong. The company's customer and market development results are remarkable, and new products are gradually being recognized by customers. 2024Q3 achieved relatively rapid revenue growth, +37.96% year over year. In terms of profitability, although gross margin declined significantly due to differences in product structure between quarters, the company's fee control was obvious, and net profit to mother was +35.09% year-on-year. Growth was significantly faster than in the previous two quarters. Based on the company's continuous acquisition of orders, the annual revenue forecast was raised, and there are sufficient orders in hand, and subsequent performance is worth looking forward to.

occurrences

In the first three quarters of 2024, the company achieved operating income of 3.977 billion yuan, an increase of 44.62% year on year; net profit due to mother 0.758 billion yuan, up 12.72% year on year; net profit after deducting non-return to mother of 0.741 billion yuan, an increase of 15.84% year on year.

Looking at a single quarter, 2024Q3 achieved operating income of 1.573 billion yuan, up 37.96% year on year; net profit to mother 0.315 billion yuan, up 35.09% year on year; net profit after deducting non-return to mother 0.306 billion yuan, up 31.41% year on year.

Brief review

Q3 Revenue grew rapidly, cost-side improvements hedged the downward impact of gross margin, and accelerated profit growth

2024Q3 achieved revenue of 1.573 billion yuan, a year-on-year increase of 37.96%. The growth rate was relatively fast, mainly benefiting from the continued strong demand for equipment in the Chinese semiconductor industry. With its technical advantages, product maturity and market recognition, the company achieved remarkable results in expanding new customers and developing new markets, and the new products were gradually recognized by customers.

In terms of profitability, 2024Q3 achieved a gross profit margin of 45.09%, a year-on-year ratio of -10.27pct. We believe this is mainly due to differences in product structure between quarters. On the cost side, the 2024Q3 company's cost rate for the period reached 23.25%, -9.05pct year on year. Among them, sales, management, R&D, and finance expenses were 5.00%, 4.45%, 12.25%, and 1.55%, respectively, and -6.19pct, -0.88pct, -3.88pct, and +1.89pct, respectively. The cost side of the company improved significantly due to the scale effect. In the first three quarters of 2024, the company's R&D expenses reached 0.539 billion yuan, an increase of 35.80% over the previous year. The company continued to promote existing product improvements, process development, and new product and process development, and increased the remuneration of R&D personnel and share payment fees for granting restricted stock confirmation.

When it comes down to the profit side, 2024Q3 achieved net profit of 0.315 billion yuan, a year-on-year increase of 35.09%, a year-on-year increase of 0.306 billion yuan, a year-on-year increase of 31.41%, and profit growth was significantly accelerated compared to the previous two quarters; the corresponding net interest rate to mother and net interest rate after deducting non-return to mother were 20.03% and 19.47%, respectively, with a slight decrease of 0.43 pct and 0.97 pct, respectively.

The annual revenue forecast was raised. Against the backdrop of sufficient orders on hand and strong domestic market demand exceeding expectations, the company continued to obtain orders and raised the full-year revenue forecast. According to the company's official account, the company raised its annual revenue forecast range from 5 billion yuan to -5.8 billion yuan to 5.3 billion yuan to -5.88 billion yuan, mainly due to ① significant progress in business expansion in domestic and foreign markets, and successfully obtained several important orders by strengthening cooperative relationships with existing customers and developing new customers; ② the company's new products are gradually gaining customer recognition in the semiconductor industry, driving an increase in sales revenue; ③ The global semiconductor industry continues to pick up. In particular, demand in the domestic market in China has exceeded expectations, which has boosted Higher demand for the company's products; ④ The company continues to optimize supply chain management and improve production efficiency to ensure the smooth execution of orders.

There are plenty of orders in hand, and future results are worth looking forward to. By the end of 2024Q3, the company had signed a contract order value of 6.765 billion yuan, an increase of 3.66% over the previous year. At the end of 2024Q3, the company's contract debt reached 0.921 billion yuan, up 5.12% from the end of 2023; at the end of 2024Q3, the company's inventory reached 4.359 billion yuan, up 11.05% from the end of 2023.

The company has sufficient orders in hand, and subsequent performance growth is supported.

Investment advice

The company is expected to achieve revenue of 5.516, 6.908, and 8.238 billion yuan respectively in 2024-2026, with year-on-year increases of 41.85%, 25.23%, and 19.26% year-on-year net profit of 1.156, 1.562, and 1.932 billion yuan respectively, with corresponding PE increases of 26.91%, 35.14% and 23.74%, respectively. The corresponding PE is 38.66x, 28.60x, and 23.12x 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.