Incident Overview

Microguide Nano released its report for the third quarter of 2024 on October 29, 2024: The company achieved operating income of 1.54 billion yuan in the first three quarters of 2024, an increase of 51.2% over the previous year; realized net profit attributable to owners of the parent company was 0.15 billion yuan, a decrease of 2.8% year on year. In the third quarter of 2024, the company achieved operating income of 0.76 billion yuan, up 18.4% year on year and 22.9% month on month; net profit attributable to owners of the parent company was 0.11 billion yuan, up 24.7% year on year and 174.8% month on month. The company's product process coverage and technical level in the semiconductor and photovoltaic fields have continued to improve, the number of devices approved by customers has increased, revenue conversion has been achieved one after another, and overall performance has grown steadily.

Profitability increased month-on-month, and inventory and contract liabilities were abundant

Profitability increased significantly from month to month, and R&D investment increased. The company's gross margin for the first three quarters of 2024 was 38.3%, down 4 pcts year on year; net margin was 9.8%, down 5.4 pct year on year. The company's gross margin for the third quarter of 2024 was 38.3%, down 3.7 pct year on year, up 1.1 pct month on month; net margin was 14.2%, up 0.7 pct year on year, up 7.9 pct month on month. In the first three quarters of 2024, the company invested 0.338 billion yuan in R&D, an increase of 82.0% over the previous year. The company further expanded its R&D team, increased R&D investment, and actively accelerated new product development activities.

Inventory and contract liabilities are abundant. By the end of the third quarter of 2024, the company's inventory was 4.42 billion yuan, up 55.9% year on year; contract debt was 2.46 billion yuan, down 25.0% year on year; and notes receivable and accounts receivable were 0.78 billion yuan, up 36.7% year on year. In the third quarter of 2024, net cash flow from the company's operating activities was -0.2 billion yuan, and the outflow narrowed from month to month.

Photovoltaic ALD has significant advantages, and equipment in semiconductors and emerging application fields continues to promote semiconductors: the company's products already cover the fields of logic, storage, advanced packaging, compound semiconductors, etc., with more than 75% of incremental orders coming from the storage sector (new storage, 3D NAND and DRAM). Demand from important customers in the industry is strong, resulting in a total of more than 0.75 billion yuan in batch repeat orders. Photovoltaics: The company's ALD products have ranked first among similar domestic companies in terms of revenue scale, total order volume and market share for many years. The company follows the pace of mass production of downstream manufacturers and continuously optimizes next-generation high-efficiency battery technologies such as XBC, perovskite, and perovskite laminated batteries, leading the technological iteration of the photovoltaic industry. Emerging application areas: The company continues to implement coating platformization strategies such as ALD+CVD, continues to carry out cutting-edge development in emerging fields, and has received customer orders in several cutting-edge fields of thin film deposition technology application with great market potential, such as optics, flexible electronics, and automotive-grade chips.

Investment advice

Considering the downward impact of the PV industry sentiment, we adjusted and forecast that the company's 2024-2026 operating income was 2.79/4.22/5.273 billion yuan (previous value was 3.698/4.558/5.61 billion yuan), and net profit to mother was 0.31/0.526/0.725 billion yuan (previous value was 0.475/0.577/0.798 billion yuan). The diluted EPS calculated using the current total share capital of 0.458 billion shares is 0.7/1.1/1.6 yuan. The company's current stock price is 42/25/18 times the PE multiples of the predicted EPS for 2024-2026, respectively. Considering that the company has a leading edge in the ALD field and continues to break through in the semiconductor field, it maintains an “gain” rating.

Risk warning

1) The risk that the subsequent expansion of production in the photovoltaic and semiconductor industry falls short of expectations. 2) Innovation risks brought about by technological iterations. 3) The risk of increased competition in the domestic market. 4) Risk of loss or shortage of core technical personnel. 5) The risk of errors in estimating market space. 6) The risk that the information based on the study was not updated in a timely manner and did not fully reflect the company's latest situation.