Matters:

The company released its report for the third quarter of 2024:

1) 2024Q1-Q3: The company achieved operating income of 0.812 billion yuan, +38.21% year over year; gross profit margin of 47.69%, -2.17pct year on year; net profit attributed/deducted from mother -0.052/-0.125 billion yuan;? 2) 2024Q3: The company achieved operating income of 0.349 billion yuan, YoY +56.79%/+52.70%; gross profit margin of 49.64%, +2.06/+11.77pct YoY; net profit attributed/deducted from mother 0.016/-0.01 billion yuan.

Commentary:

2024Q3 revenue and orders continued to grow at a high rate, and product structure optimization helped to increase gross margin significantly from month to month. The localization process of semiconductor measurement equipment is accelerating. The company continues to cultivate customer needs, continuously improve core technology, product coverage, etc., and the sales scale continues to grow. 2024Q3's revenue increased 56.79%/52.70% yoy to 0.349 billion yuan, a record high in a single quarter; product and customer restructuring led to a significant month-on-month increase in the company's gross margin; the net profit portion was affected by the increase in R&D investment and equity incentive expenses. In terms of orders, the company has abundant customer resources+plenty of orders in hand. The company's contract debt at the end of 2024Q3 increased by 0.07 billion yuan to 0.698 billion yuan at the end of 2024Q2, providing a solid foundation for the company's continued growth in performance.

Industry cycle recovery and terminal innovation drive the expansion of production in fabs, and the measurement equipment market is expected to continue to grow at a high rate.

The recovery of the industry cycle, combined with continuous innovation in terminal applications such as AI and new energy vehicles, is expected to drive the capital expenditure of fab factories back to a growth trajectory. At the same time, as the semiconductor industry chain evolves to advanced processes, the usage and demand for process quality control equipment continues to increase, and the semiconductor inspection and measurement equipment market is expected to rise sharply in volume and price. In terms of the competitive landscape, the current market is still dominated by overseas manufacturers such as KLA and applied materials, and changes in the trade situation are speeding up the domestic substitution process. With advantages such as location, customized services, and supply stability, the market share of domestic semiconductor equipment manufacturers is expected to increase dramatically in the future.

The company insists on independent research and development to build core barriers, and the platform-based layout of measurement and testing equipment is progressing smoothly. Since its establishment, the company has maintained a high level of investment in R&D, and has now successfully deployed nine series of equipment and three series of software products. All three series of intelligent software have been applied to leading domestic customers, and the coverage of application areas has been continuously improved; in addition, six series of equipment have been mass-produced and applied by leading domestic customers, and the market share of the company's various series products has been growing steadily and rapidly; the three series of equipment brightfield nanographic wafer defect detection equipment, dark field nanographic wafer defect detection equipment, and optical key size measurement equipment have all completed prototype development and shipped to clients for verification. Looking forward to the future, with the release of various new products, the company's performance is expected to continue to improve.

Investment suggestion: Considering that the company is improving the layout of quantitative testing equipment and the progress of new product release has exceeded expectations, we raised the company's 2024-2026 revenue forecast from 1.32/1.809/2.338 billion yuan to 1.32/1.959/2.607 billion yuan. Considering that the company is still in a period of high R&D investment, we adjusted the company's net profit forecast for 2024 from 0.15 billion yuan to 0.039 billion yuan, for 2025-2026 The expected profit is $0.283/0.492 billion. Referring to comparable company valuations and the growth of the company's performance, the company was given 0.45 times PSG in 2025, with a corresponding target price of 91.0 yuan, maintaining a “strong push” rating.

Risk warning: Changes in the international trade situation; downstream fab production expansion falls short of expectations; industry competition intensifies.