Main points of investment:

Guangli Technology released its 2021 results report on March 31: operating income in 2021 was about 530 million yuan, an increase of 70.33 percent over the same period last year; net profit belonging to shareholders of listed companies was about 118 million yuan, an increase of 98.78 percent over the same period last year; and basic earnings per share was 0.46 yuan, an increase of 91.67 percent over the same period last year. It is proposed to pay a cash dividend of 1 yuan (including tax) for every 10 shares, not to give bonus shares, and to increase 3 shares for every 10 shares to all shareholders with the capital accumulation fund.

With the rapid growth of the annual report, the proportion of revenue from semiconductor closed testing equipment increased to 44.86%, about 530 million yuan in 2021, an increase of 70.33% over the same period last year; the net profit belonging to shareholders of listed companies was about 118 million yuan, an increase of 98.78% over the same period last year.

In 2021, the company's revenue structure, safety production and energy-saving monitoring business revenue was 292 million, an increase of 7.15% over the same period last year, accounting for 55.14% of the main income.

In 2021, the revenue of semiconductor closed testing equipment was 238 million, a sharp increase of 518.74% over the same period last year, accounting for 44.86% of the main revenue. In 2021, 213 sets of semiconductor closed test equipment were sold, compared with 22 units in the same period last year, an increase of 868% over the same period last year. The average unit price of each semiconductor closed test equipment is about 1.1174 million yuan.

The company completed the acquisition of a further 79.59% stake in Advanced Microelectronics, increased its shareholding in Advanced Microelectronics to 94.90%, and indirectly held 94.90% in ADT. Advanced Microelectronics and its wholly-owned subsidiary ADT have been included in the company's consolidated statements since May 2021, significantly increasing the company's overall performance. The development of semiconductor closed test equipment business has greatly expanded the company's development space and opened up new market space.

The company has strong profitability and good cash flow.

In 2021, the company's overall sales gross profit margin was 53.41%, down 9.23 pct from the same period last year; the net profit margin was 22.61%, an increase in 3.23pct over the same period last year. In 2021, the company's weighted ROE was 12.13%, an increase of 4.27pct over last year.

In 2021, the gross profit margins of the two main products were relatively high, of which the gross profit margin of the safety supervision business was 65.21%, which was basically the same as the same period last year, and the gross profit margin of semiconductor closed testing equipment was 38.92%, down 3.51pct from the same period last year.

In 2021, the company's net operating cash flow was 59.81 million, an increase of 19.88% over the same period last year.

The construction of the fund-raising project is smooth, and the semiconductor intelligent manufacturing industry base is about to be put into production. The company has carried out fixed growth and convertible debt financing in 2021 and 2022 respectively to promote the production capacity construction of semiconductor closed test equipment. Among them, the company completed a fixed increase of 550 million in July 2021, invested 400 million in the first phase of the semiconductor intelligent manufacturing industry base, and built an annual production capacity of 500 semiconductor precision dicing machines.

The financing plan of convertible bonds was issued in December 2021, which is intended to raise 400 million yuan for ultra-precision and high-stiffness air spindle research and development and industrialization projects. The localization of the air spindle of the core components continues, which is expected to ease the production bottleneck and promote cost reduction and efficiency.

According to the plan, the company will accelerate the construction of the "Semiconductor Intelligent Manufacturing Industry Base Project (Phase I)", strive to complete the construction as soon as possible, and ensure that the production workshop will be put into use in the first half of 2022. We will actively promote the convertible bond project of the "Ultra-precision and High stiffness Air Spindle Research and Development and industrialization Project" and speed up the localization of the air spindle. As the company's two major fund-raising projects have reached production, the company's semiconductor equipment capacity bottleneck opened, helping the company's performance to take off.

The localization rate of semiconductor closed test equipment is low, and the infiltration space is huge.

Under the background of the cyclical impact of global semiconductors and the transfer of global semiconductor industry, as well as the unprecedented technology blockade imposed on China by some Western countries led by the United States, China continues to introduce relevant policies to support China's semiconductor industry with unprecedented efforts and drive a huge amount of money to support the development of China's semiconductor industry. Domestic wafer foundry lines and IDM production lines ushered in a construction peak, bringing huge equipment demand space. The boom in the industry has driven the demand for semiconductor equipment in China to a high growth range. In the field of high-end precision cutting and slicing equipment, Japanese DISCO, Tokyo Precision TSK and Israel ADT occupy a large market share in this field. Compared with foreign products, there is still a huge gap in the technical level of domestic semiconductor equipment, lack of brand awareness and lack of market competitiveness.

Through many mergers and acquisitions, the company has become one of the only two companies in the global industry that can provide cutting and slicing mass production equipment, core components-air spindles, blades and other consumables. In the field of semiconductor closed test equipment, the company has a large number of industry experience, technology and customer resources accumulated by LP, LPB and ADT for many years, and has the core components in the field of semiconductor packaging-high-performance and high-precision air spindle. Domestic R & D team has fully mastered the core technology of slicing equipment and core components air spindle, these resources have laid a solid foundation for the company to quickly open up the market.

The company has made concerted efforts to develop a number of domestic slicing machines, which have been manufactured in Zhengzhou factory. Among them, the 12-inch fully automatic biaxial cutting dicing machine model 8230 produced by the company's Zhengzhou factory and the 12-inch fully automatic biaxial cutting dicing machine produced by the Israeli Haifa factory mainly facing other international markets has entered the domestic and foreign head closed testing enterprises and has been sold in bulk. With the company's fund-raising project Zhengzhou new plant put into use in the second quarter of 2022, the capacity bottleneck opened, the company is expected to usher in the rapid development of semiconductor closed test equipment business.

Profit forecast and valuation

With the company putting into production, semiconductor closed test equipment has entered the performance release period. We forecast that the company's operating income from 2022 to 2024 will be 1.035 billion, 1.424 billion and 1.781 billion respectively, and its net profit will be 226 million, 315 million and 409 million respectively, and the corresponding PE will be 31.56X, 22.62X and 17.4X respectively.

Risk tips: 1: macroeconomic is not as expected; 2: downstream demand is lower than expected; 3: raw material prices are rising, gross profit margin is falling; 4: the company's fund-raising project progress is not as expected.