Xinyichang released its 2024 semi-annual report. The company achieved revenue of 0.56 billion yuan in 2024H1, yoy +3.93%, net profit attributable to mother 0.066 billion yuan, yoy +50.32%, after deducting non-attributable net profit of 0.062 billion yuan, yoy +58.77%. The consolidated gross profit margin for the first half of the year was 35.04%, and the net profit margin to mother was 11.83%, +3.65% year over year. The company achieved revenue of 0.297 billion yuan in a single quarter, yoy +64.39%, net profit to mother 0.037 billion yuan, yoy +362.45%, after deducting non-attributable net profit of 0.034 billion yuan, yoy +288.58% in a single quarter. Single quarter gross profit margin 32.8%, yoy -2.6%, net profit margin 12.6%, yoy +20.4%. In a complex market environment, the company actively adjusts its strategic layout, combines downstream market development trends, optimizes product structure, increases overseas market expansion, and strives to find more new growth points.

Mini LED continues to reduce costs, terminal penetration increases, and the desire to expand downstream production increases, and the company's Mini LED equipment is in high demand. With the introduction of favorable policies in the industry, the yield rate of the industrial chain gradually increased, the cost of Mini LED fell rapidly, and the terminal application market began rapidly. In terms of mini LED direct display, application scenarios continue to expand, including special screens for XR virtual cinemas, cinema screens, and LED all-in-one machines (for smart education, conferences, medical care, command centers, exhibitions, studios, etc.), etc., and the penetration rate has increased. According to Lotu Technology's estimates, the global market size of Mini LED will reach 3.3 billion US dollars in 2028, and the 2024-2028 CAGR is about 40%, and there is plenty of room for development. Mini LED backlight solutions are rapidly penetrating the TV, laptop, tablet, display, car display and other markets, and major TV terminal brands are focusing on promoting Mini LED backlight TVs. According to data from Qunzhi Consulting, global shipments of Mini LED backlit TVs were 3.2 million units in 2023, up 10.7% year on year. Shipments are expected to reach 5.6 million units in 2024, an increase of 73.3% year on year, and the shipment scale will reach 7.5 million units by 2025. Xinyichang's Mini LED crystal fixing machine has excellent performance. Relying on leading technical advantages and market position, it will greatly benefit from increasing the penetration rate of terminals and expanding production for downstream customers.

Reserve a number of semiconductor packaging equipment technologies and make efforts to replace deep-water areas with domestic production. The localization rate of semiconductor packaging equipment is low. Xinyichang has long focused on related technology research and development, and is committed to promoting domestic replacement of semiconductor packaging equipment. The semiconductor packaging equipment being developed by the company includes high-precision fully automatic chip planar lead bonding equipment, turret test, sorting, marking and taping all-in-one machine, and eutectic welding process research and development equipment for IC lead frames. In terms of new products, the company is advancing research and development of advanced packaging equipment for memory chips and computing power chips according to the plan. Kaijiu's semiconductor wire welding equipment and Feihong's test and packaging equipment have all been verified by customers and small-batch shipments have begun. With the introduction and iterative upgrading of the company's new semiconductor packaging equipment, we believe that the semiconductor business is expected to drive the company's medium- to long-term growth.

We have always attached importance to research and development, and are deeply involved in the fields of Mini/Micro LED and semiconductor packaging equipment. The company has always focused on technology research and development of intelligent manufacturing equipment products, maintaining self-iteration of core competitiveness, improving the ability to respond quickly to market changes and continuous technological innovation, and optimizing the sustainable development core. In the first half of 2024, the company spent 43.4208 million yuan on R&D, and the R&D cost ratio was 7.75%, laying a solid foundation for future market development of products. As of the end of June 2024, the company had 336 R&D personnel, added 31 new patents and 21 software copyrights in the first half of the year. The company has mastered many core technologies such as high-speed mixed signal wireless transmission technology, parallel computing technology, Mini LED defect detection algorithms, and smart production lines through independent research and development. It is the first domestic enterprise to develop intelligent manufacturing equipment that can be used in Mini LED production. The technical indicators of related equipment are at the leading level in the industry. Companies in the semiconductor sector have also been recognized by customers from well-known semiconductor companies such as Changdian Technology, Huatian Technology, Tongfuwei, Goodtech Electronics, Yangjie Technology, and Shaohua Technology.

Profit forecast and investment advice: We expect the company to achieve revenue of 1.36/1.73/2.34 billion yuan and net profit of 0.13/0.22/0.35 billion yuan in 2024-2026. We are optimistic about the company's leading domestic position in the Mini LED crystallizer market. The company's new semiconductor products are developing smoothly, the volume is imminent, and it maintains a “highly recommended” rating.

Risk warning: downstream demand falls short of expectations; new product development progress falls short of expectations; new technology promotion progress falls short of expectations