occurrences

On April 29, the company disclosed the 2023 Annual Report and the 2024 First Quarter Report.

In '23, the company achieved revenue of 22.079 billion yuan, +50.32% year over year; net profit to mother was 3,899 billion yuan, +65.73% year over year; net profit after deducting non-return to mother was 3,581 billion yuan, +70.05% year over year.

24Q1 achieved revenue of 5.859 billion yuan, +51.36% year over year; net profit to mother was 1,127 billion yuan, +90.40% year over year; net profit after deducting non-return to mother was 1,072 billion yuan, +100.91% year over year.

Key points of investment

The steady rise in IC equipment market share is driving steady growth in performance. The company's revenue continued to grow rapidly, with a compound growth rate of 51.00% from '21 to '23. In '23, the company continued to increase investment in R&D, and product quality improved steadily. In '23, the company achieved revenue of 22.079 billion yuan, +50.32% year over year; by product, the company's electronic process equipment/electronic components achieved revenue of 196.11/2,433 billion yuan in '23, +62.29%/-5.51% YoY. Among electronic process equipment, the company's revenue from etching equipment in '23 was nearly 6 billion yuan, revenue from film deposition equipment exceeded 6 billion yuan, revenue from vertical furnaces and cleaning equipment totaled more than 3 billion yuan, and revenue from equipment in the field of new energy photovoltaics was nearly 2 billion yuan. In '23, the company achieved net profit of 3,899 billion yuan, +65.73% year-on-year, mainly due to: 1) the company continued to enhance its product competitiveness, and its revenue scale increased dramatically, and the company signed new orders of more than 30 billion yuan in '23; 2) While the number of contracts and orders increased dramatically year on year, cost reduction and efficiency efforts achieved remarkable results, and the cost ratio decreased year on year. In '23, the company achieved net profit without deduction of 3,581 billion yuan, +70.05% year-on-year, mainly due to a year-on-year increase of 1,546 billion yuan in net profit and loss of non-recurring profit and loss of 71.409 million yuan year-on-year, and a significant year-on-year increase in the absolute value of recurring profit and loss. 24Q1 achieved revenue of 5.859 billion yuan, +51.36% over the same period. The main reason is that the company continues to focus on its main business, refine customer needs, deepen technology research and development, and continuously improve its core competitiveness. The market share of process equipment such as etching, film deposition, cleaning and furnace tubes used in the field of integrated circuits has steadily increased. 24Q1 achieved net profit of 1,127 billion yuan, +90.40% year over year; net profit without return to mother was 1,072 billion yuan, +100.91% year over year, mainly due to the continuous expansion of the company's revenue scale. At the same time, the scale effect gradually became apparent, and the cost ratio declined steadily.

Leading platform-based companies continue to benefit from a wave of production expansion. The company signed more than 30 billion yuan of new orders in '23, of which the integrated circuit sector accounted for more than 70%, mainly because the company always insisted on customer needs-oriented product innovation. In '23, the main business showed a good development trend, and market recognition continued to increase. Dozens of process equipment such as etching, film, cleaning, and furnace tubes used in the high-end integrated circuit field achieved technological breakthroughs and mass production applications, and the process coverage and market share increased dramatically. On March 19, California time, the “300mm Fab 2027 Outlook Report” released by SEMI shows that under the impetus of government incentives and chip localization policies, China will maintain an annual investment scale of more than 30 billion US dollars over the next four years and continue to lead global fab equipment spending. Over 23 years, the company has continued to make efforts on the product side: 1) In terms of etching technology, it has achieved full coverage of 12-inch silicon, metal, and medium etching machines, formed a more complete etching solution, achieved key breakthroughs in the field of medium etching equipment, released a full range of plasma peeling products to meet the needs of customers in different processes, and the sales volume of standalone models of deep silicon etching machines using high depth-to-width ratio etching processes has broken 100, and the cumulative number of etching product lines has exceeded 3,500 cavities. 2) In terms of thin film technology, market demand is accurately positioned, and many key technical problems of metal films and dielectric films are overcome by differentiated routes. The series of products have been recognized by key customers to achieve mass sales; epitaxial equipment has achieved full process coverage in the fields of integrated circuits, power semiconductors, silicon materials, compound semiconductors, etc., and the cumulative number of thin film deposition products shipped has exceeded 5,500 cavities. 3) In terms of cleaning technology, trough cleaning machines have achieved full process coverage, and single-chip cleaning machines have achieved new breakthroughs in high-end processes in the previous stage, opening up a wider market space for the cleaning business sector. 4) In terms of heat treatment technology, new products such as rapid thermal annealing equipment and vertical furnace atomic layer deposition equipment are constantly emerging, and the ability to provide customers with comprehensive solutions continues to improve. As a leading platform-based enterprise, with the advantages of core process equipment such as etching+film+cleaning+furnace tube equipment, the company is expected to continue to obtain high new orders in a new round of production expansion. Combined with the increase in profitability brought about by scale effects, the company's future performance is expected to continue to maintain a high growth trend.

Investment advice

We expect the company to achieve revenue of 302/403/53.9 billion yuan in 2024/2025/2026, and realized net profit of 57/80/112 billion yuan respectively. The current stock price corresponding to 2024-2026 PE is 29 times, 21 times, and 15 times, respectively, maintaining a “buy” rating.

Risk warning

Risk of external environmental uncertainty; risk of technology iteration; risk of human resources; risk of downstream production expansion falling short of expectations.