Event: The company released its report for the third quarter of 2023. In the first three quarters of 2023, the company achieved revenue of 1,147 billion yuan, an increase of 16.91% over the previous year; realized net profit of 245 million yuan, a year-on-year decrease of 0.76%; and realized net profit of 216 million yuan, a year-on-year decrease of 1.01%. On a quarterly basis, in 2023, Q3 achieved revenue of 458 million yuan, an increase of 73.09% over the previous year, an increase of 20.53% over the previous year; realized net profit of 123 million yuan, an increase of 85.79% over the previous year, an increase of 33.98% over the previous year; and achieved net profit of 114 million yuan, an increase of 50.81% over the previous year.

The market recovered, performance improved, and profitability steadily rebounded: Benefiting from the recovery in the market for terminal applications such as smartphones and high-definition televisions, etc., in Q3 2023, the company's revenue and profit all achieved rapid growth, and business performance improved dramatically. In 2023, Q3's gross margin was 36.69%, up 4.33pcts year on year; net profit margin was 26.78%, up 1.83pcts year on year. In terms of expenses, the company's sales, management, R&D, and financial expenses in the first three quarters of 2023 were 0.55%/6.06%/6.56%/-0.88%, respectively, with year-on-year changes of -0.15/+0.19/-1.04/-0.97pcts respectively. Among them, the company's financial expense ratio and absolute value declined year-on-year in the first three quarters, mainly due to a sharp increase in interest income.

The IPO raised capital to increase the 12-inch wafer packaging and testing layout, and the new production capacity was gradually implemented: In April 2023, the company was officially listed on the Science and Technology Innovation Board of the Shanghai Stock Exchange. The IPO company raised 2,233 billion yuan for projects such as the “Advanced Packaging Testing Production Base Project” and the “Advanced Packaging Testing and Production Base Phase II Packaging R&D Center Project” to enhance the full process production capacity of the company's 12-inch wafer bump manufacturing, testing, and thin-film coating packaging, and expanding the company's 12-inch wafer bump manufacturing and advanced packaging production capacity to meet the 12-inch chip driver display The one where the inch wafer was transferred Major trends and reduced the company's production capacity bottlenecks, consolidated the company's leading position in the field of display driver chip packaging and related intelligent manufacturing technology, and laid a solid foundation for the company's future business development and expansion. According to the company's investor relations activity record sheet on October 11, the Hefei plant for the advanced packaging testing and production base project completed the equipment launch ceremony in August of this year. Mass production is expected in Q1 of 24, and is expected to achieve a production capacity of about 10,000 pieces of BP/CP per month in the future, and a production capacity of about 30 million EA/month for COF. After the completion of the project, it will help the company continue to maintain its leading position in the domestic display driver chip packaging and testing business, and further narrow the gap with leading overseas companies.

The market space for the integrated circuit industry is vast, and domestic substitution has great potential: the company's prospectus indicates that in the future, with the rapid growth of emerging markets and applications such as cloud computing, big data, metaverse, and wearable devices, the integrated circuit market size is expected to continue to maintain a high level of growth. CCID predicts that the global integrated circuit market sales will reach 715.3 billion US dollars in 2025, and CAGR of more than 10% from 2022 to 2025; in addition, with the continuous increase in the localization rate and the increase in terminal market demand, mainland China by 2025 Integrated circuit sales will reach 1909,888 billion yuan, an increase of 82.62% over 2021. According to the company's prospectus, China's customs data shows that mainland China imported 635.5 billion integrated circuits in 2021, with a total import volume of 2,793.482 billion yuan, an increase of 15.42% over the previous year; according to data from the National Bureau of Statistics, mainland China's integrated circuit production in 2021 was 359.4 billion units, an increase of 37.49% over the previous year. Compared to the import volume of integrated circuits, the integrated circuit supply chain in mainland China is still small. It can be predicted from this that as the domestic substitution process in China's integrated circuit industry continues to accelerate, integrated circuit enterprises in mainland China will usher in more development opportunities.

Maintaining an “accumulation” rating: The company is mainly engaged in advanced packaging and testing of integrated circuits, focusing mainly on the field of display driver chip packaging and testing of non-display chips represented by power management chips and RF front-end chips. The company currently has the most advanced 28nm process display driver chip packaging and measurement production capacity in the industry. The main technical indicators and major process yields are at the leading level in the industry.

We are optimistic about the localization trend of the integrated circuit industry and the company's technical advantages in the field of chip packaging and testing; in the future, as consumer electronics demand recovers, the semiconductor industry's prosperity will continue to rise, and the company's profitability is expected to improve quarter by quarter. The company's net profit for 2023-2025 is estimated to be 268 million yuan, 391 million yuan and 494 million yuan respectively, EPS is 0.22 yuan, 0.33 yuan, and 0.42 yuan, and PE is 54X, 37X, and 29X respectively.

Risk warning: Increased risk of competition; risk of high customer concentration; risk of exchange rate fluctuations; risk of non-display business expansion falling short of expectations.