Leading sealing and testing company with in-depth layout in multiple fields. The company has seven major sealing and testing bases around the world, and has acquired 85% of AMD Suzhou and AMD Penang shares for a global layout. The company's nine major product packages are mature, and are located in Chiplet and other fields, and raised funds for project development and construction to expand the scope of business. Demand in the semiconductor market fluctuated in '23, and the company seized market opportunities brought about by the development of generative AI applications such as mobile phones and ChatGPT, and achieved revenue of about 22.3 billion yuan, an increase of 4% over the previous year. Affected by factors such as industry sentiment and exchange rate changes, the company's profit margin was under pressure in the short term; as the industry recovered and the company's strategy adjusted, the net profit of 23Q3-Q4 in a single quarter was RMB12,233 million, which turned a loss into a profit, and the net profit for the full year of '23 was about 169 million yuan.
Core customers are stable, benefiting from the recovery of the PC market. The company established a “joint venture+cooperation” relationship with AMD and gradually became AMD's largest sealed testing supplier. Tongfu Chaowei Suzhou and Tongfu Chaowei Penang became the company's main sources of revenue. With the launch of AI PCs and the advent of the wave of switching, the PC market is recovering. Demand for computing power in new AI application scenarios increases, and AI PCs require stronger dedicated AI chip support, which will drive the business volume of chip manufacturers such as AMD to increase, thus driving the development of the sealing and testing business. The company has a leading edge in advanced packaging technology such as 2.5D/3D, and its products cover the PC side, and the business scale is expected to grow rapidly.
AI chips are on the rise, and CoWoS packages are bringing in new volume. Advanced packaging has broad development prospects. Chiplet technology is rapidly developing, bringing improvements in yield, flexibility, computing power, and cost. Among them, the market demand for TSMC's CoWoS packaging technology has surged, limited by TSMC's production capacity issues, and other packaging and testing plants will also participate in OEM manufacturing. The company already has the capacity to produce Chiplets on a large scale. 7nm products have been mass-produced, and 5nm has also generated revenue, forming a differentiated competitive advantage in the industry. The MI300 series accelerators launched by AMD have more advantages in AI computing power and memory, and production capacity is more guaranteed. In the future, with the release of high-performance computing and AI requirements, the business may expand, bringing demand for Chiplet packaging, and contributing continuously to the company's business.
We predict that the company's earnings per share for 2024-2026 will be 0.62, 0.79, and 0.94 yuan, respectively. Based on a comparable company's 24-year average PE valuation level of 48 times, the corresponding target price is 29.76 yuan, giving it a purchase rating for the first time.
Risk warning
Industry and market fluctuations; new technologies, new processes, and new products cannot be industrialized as scheduled; changes in the supply and price of major raw materials; risk of exchange rate fluctuations; risk of international trade.