Core views:

24Q1 etched high growth in business revenue, R&D investment and non-recurring profit and loss dragged down profit performance in the short term. The company published its quarterly report for '24. In 24Q1, the company's revenue was 1,605 billion yuan, yoy +31.23%. The company's new shipments for high-end products with key etching processes in advanced logic and memory device manufacturing increased significantly. 24Q1 etching equipment revenue was 1,335 million yuan, yoy +64.05%; net profit to mother was 249 million yuan, yoy -9.53%. The main reason was that, on the one hand, the company actively promoted the development of various new products, increased investment in R&D materials and increased R&D personnel. On the other hand, Q1 R&D investment increased more year-on-year. Losses of 0.14 billion yuan, yoy-0.61 million yuan. The changes in non-recurring profit and loss are mainly due to the decline in the 24Q1 secondary market share price: (1) the fair value of the company's equity investment measured at fair value decreased by 40.77 million yuan, yoy-41 million yuan; (2) the current period included government subsidies of 14 million yuan, yoy-0.23 million yuan; net profit after deducting non-recurring profit and loss of 263 million yuan, yoy +15.4%; gross profit margin of 44.94%, yoy-0.94pct; net profit margin 15.5%, yoy-6.98pct.

High-end etching products are leading the way, and the expansion of new deposition products is progressing steadily. According to the company's 23 annual report and 2014 quarterly report, the company's etching equipment covers more than 95% of domestic application needs. Some machines are used in advanced processes such as 5nm. The company invests heavily in the development and verification of key etching equipment for advanced chip manufacturing. Currently, various devices for the most critical etching process in logic and memory chip manufacturing have been verified on customer production lines. In terms of deposition business, the company's tungsten series thin film deposition products have been verified by many logic and storage customers for CVD/HAR/ALD W tungsten equipment and obtained customer orders; the company plans to launch more than 10 new thin film deposition equipment in 24 to increase the coverage of film equipment and further expand the market.

Profit forecasting and investment advice. The company's net profit for 24-26 is estimated to be 20.23/25.91/3.307 billion yuan, keeping the view that the company's reasonable value is 222.62 yuan/share unchanged, corresponding to 68 times PE in 24 years, maintaining a “buy” rating.

Risk warning. The industry cycle fluctuates; customer expansion falls short of expectations; market competition intensifies.