Incident: North China Huachuang released its 2024 three-quarter report. In the first three quarters of 2024, the company achieved revenue of 20.353 billion yuan, a year-on-year increase of 39.51%; net profit to mother was 4.463 billion yuan, an increase of 54.72% over the previous year.

Looking at Q3 alone, 2024Q3 achieved revenue of 8.018 billion yuan, up 30.12% year on year, up 23.81% month on month, and realized net profit of 1.682 billion yuan, up 55.02% year on year and 1.68% month on month.

The high growth of electronic process equipment has driven the company's performance to improve. The company's performance in the first three quarters achieved rapid growth, mainly due to high revenue growth in the company's main business electronic process equipment. According to the company's earlier announcement, revenue and profit grew rapidly in the first three quarters of 2024, mainly due to: 1. The company carefully studied customer needs, enriched the product matrix, broadened process coverage, continued to maintain a good development trend, market share steadily increased, and revenue for the first three quarters achieved steady year-on-year growth. 2. As the company's revenue scale continued to expand, the advantages of the platform gradually became apparent, operating efficiency continued to improve, the cost ratio declined steadily, and net profit attributable to shareholders of listed companies continued to grow year-on-year in the first three quarters.

There are plenty of orders on hand, and contract liabilities and inventory are healthy. In 2023, the company's revenue for etching equipment, film deposition equipment, and vertical furnaces and cleaning equipment was nearly 60, over 60, and over 3 billion yuan respectively. It is expected that the company's share of subsequent advanced process orders will continue to increase, driving the company's profitability to continue to increase. The company continues to enhance its product competitiveness, and new orders of more than 30 billion yuan were signed in 2023, providing an effective guarantee for the company to achieve rapid growth throughout 2024. Meanwhile, as of 2024Q3, the company's contract debt reached 7.783 billion yuan, maintaining a high level; in terms of inventory, the company's inventory amount increased from 16.992 billion yuan at the end of 2023 to 23.229 billion yuan at the end of 2024Q3, and the company's on-hand orders were quite full.

Profit forecasting

We expect the company to achieve revenue of 30.07, 39.196, and 49.736 billion yuan in 2024-26, and net profit to mother of 5.734, 7.694, and 10.224 billion yuan, corresponding to PE 41.63, 31.03, and 23.35x, maintaining the company's “buy” rating.

Risk warning: risk of downstream demand falling short of expectations; risk of fluctuations in industry sentiment; risk of new product development falling short of expectations