China's leading supplier of panel testing equipment and semiconductor testing equipment. Huaxingyuan is mainly engaged in the R & D, production and sales of flat panel display and semiconductor testing equipment. The company's panel testing equipment business entered the BOE supply system in 2009 and established a good cooperative relationship with Apple and Samsung in 2013. The company's semiconductor testing equipment business is progressing smoothly and has been recognized by major customers of BMS chip, CIS chip and SiP chip module.
The company will achieve an income of 1.678 billion yuan and a net profit of 265 million yuan in 2020.
The business of semiconductor testing equipment opens up a new space for the growth of the company. According to SEMI, the market for test equipment in 2020 is about $6.9 billion, of which the market for test machines is about $4.4 billion, the market for probe tables is about $1 billion, the market for sorting machines is about $1.2 billion, the market for other equipment such as AOI is about $300 million, and the market for Chinese mainland semiconductor test machines is about $1.4 billion, accounting for about 30% of the global market for semiconductor test equipment. The leading manufacturers of semiconductor testing machines, Edwin of Japan and Terida and Kexiu of the United States, account for nearly 90% of Prida worldwide, while in the Chinese semiconductor test machine market, the domestic replacement rate is less than 10%, and the replacement space is huge.
The technical strength is in the lead, and the semiconductor business is progressing smoothly. The company has accumulated for many years in the field of flat panel display testing equipment, accumulated a profound technical foundation, and cultivated the development potential of the company in the field of semiconductors. at present, part of the performance index of the testing machine has been able to match the international leading manufacturers, and has strong market competitiveness. at the same time, the company's client verification is smooth and the order is full. We expect the company's semiconductor business income and net profit to reach about 400 million yuan and 100 million yuan respectively in 2021, of which the standard semiconductor test equipment business is expected to contribute 100 million yuan to the company's revenue and will enter the rapid growth channel. The non-standard custom battery management (BMS) chip business of major customers in North America is expected to contribute about 300 million yuan in revenue.
The wave of OLED and VR/AR drives the demand for testing equipment, and the acquisition of Ollitone broadens the product matrix. The investment of OLED production line in China is intensive, and the investment of the sixth generation line is more than 200 billion yuan. The application of new display technology such as OLED and Micro-LED will expand the market demand of flat panel display testing equipment. In addition, considering the improvement of VR/AR equipment penetration in the future, the company is expected to fully benefit the rapid development of OLED and Micro-LED industry. On the other hand, the company successfully acquired Oliton (intelligent wearable assembly and testing equipment manufacturer) in 2020, successfully expanded the company's business line among A customers from iPhone and iPad to Apple Watch, AirPods, HomePod, and increased the accumulation of acoustics and airtightness testing technology, which is expected to further broaden the company's product matrix.
Profit forecast, valuation and rating: Huaxingyuan Chuang is a leading supplier of panel and semiconductor test equipment in China. Panel testing equipment benefits from the rapid development of OLED and VR/AR, and there is a huge room for domestic alternatives for semiconductor test equipment. We are optimistic about the development prospect of the company's semiconductor test equipment in the future. We estimate that the return net profit of the company from 2021 to 2023 is 3.52,4.52 and 567 million yuan respectively, and the current market capitalization corresponding to PE is 48x, 37x and 30x respectively, which is lower than the average PE of comparable companies, covering for the first time and giving a "buy" rating.
Risk hint: market competition continues to aggravate the risk; R & D of key projects is less than expected risk