The company is a domestic leading company in the field of MEMS fine microelectronic components and semiconductor test probes, actively seize the development opportunities of the industry, continue to introduce global high-quality customers, and have great potential for development in the long run. However, due to the influence of the weakening demand in the downstream market and the increase in R & D costs, the company's 2022Q1-Q3 performance is significantly under pressure. we adjust the company's 2022-2024 EPS forecast to 0.71 EPS 1.39 yuan 1.94 yuan (the original forecast value 1.41 pound 2.01 pound 2.87 yuan), and adjust the target price from 98 yuan to 78 yuan, maintaining the "buy" rating.
The weakening of downstream market demand and the increase of R & D costs have led to pressure on the company's performance. 2022Q1-Q3 achieved revenue of 231 million yuan, down 18.02% from the same period last year, and realized net profit of 44.625 million yuan, down 46.46% from the same period last year. In the first three quarters, the company's gross profit margin was 41.5% (year-on-2.15pct) and net profit was 19.3% (year-8.64pct). Of this total, Q3 realized revenue of 63 million yuan, a decrease of 37.88% over the same period last year, a net profit of 8 million yuan, a decrease of 71.83% over the same period last year, a gross profit margin of 38.2% (5.33pcts) and a net profit rate of 13.1% (8.77pcts). The lower-than-expected performance of 2022Q1-Q3 is mainly due to the following three reasons: due to the weakening global market demand, the high inventory pressure of some downstream customers and the industry cycle, the periodic income of MEMS-related fine components and semiconductor chip test probes has decreased. The company increased investment in research and development, focusing on projects such as core micro components, ultra-high frequency probe test components, substrate-level test probes and some miniature medical consumables in the field of AR/VR. 2022Q1-Q3 R & D expenditure was 37.836 million yuan, an increase of 103.15% over the same period last year. The decline in gross profit margin was mainly due to the increase in average costs caused by the decline in revenue volume.
The company's short-term performance is under pressure and has great potential for long-term development. In the short term, due to the weakening demand in the downstream market, the inventory pressure of some important customers is great, resulting in a decrease in company-related orders and a decline in revenue. In the medium term, as the company binds global leading customers such as Apple Inc and NVIDIA Corp, the company is expected to benefit first as consumer electronics demand picks up in the future. At the same time, the company has actively opened up overseas markets, obtained the semiconductor test probe verification plans of several chip designers, and has obtained some orders from several chip designers. At present, the localization rate of the probe card market is only 10%, and the base market localization rate is 20%. The company currently has a global market share of less than 2%. In the long run, the company will continue to benefit from the process of domestic substitution of semiconductors.
MEMS wafer-level probe cards have a broad market space, and additional investment projects are determined to provide a new engine for growth. According to the data of VLSI, the global probe card market is more than 2 billion US dollars in 2020, and the substrate-level test probe market is 500 million US dollars. At present, the company has carried out related research on MEMS wafer test probe and substrate-level test probe, forming a related technical reserve, at the same time, the funds raised have been landed, and will continue to increase investment in the future. According to the company's forecast, the MEMS wafer test probe project is expected to reach 50% of production in 2025, bringing operating income of 286 million yuan, net profit of 45 million yuan, gross profit of 41.02%, net profit of 98 million yuan and gross profit of 38.60% after full production in 2028. It is estimated that the board-level test probe project will reach 50% production in 2025, with operating income of 64 million yuan, net profit of 15 million yuan, gross profit of 45.79% and net profit of 115 million yuan, net profit of 44 million yuan and gross profit of 44.52% after full production in 2028. If the additional investment project is put into production smoothly, it will provide a new growth engine for the company.
Risk factors: the risk of technology renewal and product upgrade; the risk of high customer concentration; the risk that new product development is not as expected; the risk of trade dispute; the risk of brain drain.
Profit forecast, valuation and rating: the company is a domestic leading company in the field of MEMS precision electronic components and semiconductor test probes, with a foothold in the precision manufacturing industry for more than 10 years, with excellent product rate, manufacturing accuracy and capacity scale in the forefront of the country. The company actively seize the opportunity of industry development, continue to introduce high-quality customers around the world, expand production capacity, in the long run, great potential for development. However, taking into account the weakening demand in the downstream market in the short term and the impact of increased costs caused by the company's continued investment in new product research and development, the company's 2022Q1-Q3 performance is significantly under pressure. we adjust our EPS forecast for 2022-2024 to 0.71 EPS 1.39max 1.94 yuan (the original forecast is 1.41 pound 2.01 PE), with reference to the current average valuation level of comparable companies (Nagagawa Technology and Minxin shares are expected to be 46 times PE in 2023). At the same time, considering that the company's historical average PE is 68 times, the company will be given 56 times PE in 2023, and the target price will be adjusted from 98 yuan to 78 yuan, maintaining the "buy" rating.