Introduction to this report:
23/24Q1 was affected by short-term cost increases. The introduction of semiconductor equipment provided additional volume, while the laser outsourcing business provided short-term performance support.
Key points of investment:
Maintaining the “Overweight” rating, the target price was lowered to 27.9 yuan. The inspection cycle for customized equipment was long, and the pace of revenue recognition revenue slowed down. Net profit withheld from mother was achieved in 2023 of 0.25 million yuan (YoY -51.13%), and the performance was slightly lower than expected. Considering that downstream demand for high-potential equipment such as massive transfers remains to be seen, EPS was lowered to 0.61 (-0.6) /0.76 (-1.04) yuan in 2024-2025, and EPS was added by 1.01 yuan; the share of the company's export revenue share of high-end lasers such as picoseconds increased and improved gross profit margin, and automotive equipment successfully developed customers, giving the company 46xPE in 2024, which is higher than the industry average valuation (42xPE). The target price was lowered to 27.9 yuan, maintaining the “gain” rating.
The increase in sales/R&D expenses affected Q1 results, and the new business will provide year-round support. The company actively exhibited the business, and 2024Q1 achieved revenue of 116 million yuan (YoY +18.2%); developed new equipment such as IC advanced packaging applications, and expanded the sales and R&D team, which led to an increase in the cost ratio to 56% (+4pct) during the Q1 period, which had a short-term impact on performance. 2024Q1 net profit without return to the mother was 0.1 billion yuan (YoY -540.11%). Considering the continued boom in high-end laser sales, revenue from battery film removal and perovskite laser equipment will be confirmed centrally during the year, and the impact on annual results will be limited.
The launch of new equipment such as silicon carbide and TGV/TMV will release profits in the second half of 2024. The equipment trade-in policy catalyzes iterative demand. The company is expected to continue to receive orders for new equipment such as 8-inch silicon carbide ingot cutting and TGV processing. At the same time, considering the delivery period of about 12 months for laser equipment, the original order will also be confirmed in the second half of the year, and the implementation of the new equipment will improve performance.
The increase in the scale of export sales of high-end lasers hedges the impact of declining gross margin of equipment. Sales revenue from high-end ultrafast lasers such as femtoseconds increased 66% year on year, driving the gross margin of the laser business to 48.58% (YoY+8.14pct), hedging the impact of a 4.21pct year-on-year decline in laser processing equipment. Until revenue from new equipment is confirmed, the laser business will provide performance support for the company.
Risk warning: Technology iteration affects product sales; increased competition puts pressure on gross margin.