We have focused on sealing and testing for nearly 20 years, and our performance has improved with downstream recovery. Qipai Technology Co., Ltd. was established on November 7, 2006, formerly known as Shenzhen Qipai Technology Co., Ltd. Since its inception, the company has focused on the integrated circuit packaging and testing business. With years of deep cultivation and accumulation, the company has now formed a total of more than 300 packaging forms and has become one of the largest local integrated circuit packaging testing enterprises in South China. Since 2022, the terminal consumer market has continued to be sluggish. The company's performance was affected by this, and its performance was poor. With the end of the inventory removal cycle and the recovery of the consumer electronics industry, 2024H1 achieved operating income of 0.313 billion yuan, an increase of 26.61% year on year; net profit to mother of -0.041 billion yuan, an increase of 41.53% year on year. The inflection point has already been reached.

The low point of the cycle has passed, and the increase in shipments bucked the trend, driving a reversal in performance. Beginning in 2023Q3, the industry began to usher in a new round of growth opportunities. According to the American Semiconductor Industry Association (SIA), global semiconductor sales reached 149.9 billion US dollars in the second quarter of 2024, up 18.3% year over year, and the recovery momentum is strong. Beginning in 2023Q3, the company's revenue growth rate turned positive year on year and bottomed out. Currently, downstream chip manufacturers are recovering strongly. Many consumer IC design companies have achieved high revenue growth rates in 2024H1, and the downstream recovery is expected to continue to be transmitted upward. Although product prices declined due to poor industry demand in 2023, in the context of the company's continuous diversification of product types, annual sales still reached 9.62% year-on-year growth. In the first half of 2024, the company's sales volume increased 26.69% year on year. The recovery in demand in the future is expected to drive up industry prices and add flexibility to the company's performance growth.

The proportion of advanced packaging continues to increase, and power packaging and wafer testing and power device packaging and testing services are being expanded. In the context of the post-Moore era, heterogeneous integrated chip technology (Chiplet) will become one of the mainstream methods to further improve chip performance. Chiplet technology will drive the CP testing process and demand for advanced packaging. The company has continued to make efforts in the field of advanced packaging in recent years. In 2023, the company's advanced packaging accounted for 32.49% of its main business revenue, an increase of 3.66% compared with 2022. In June 2022, the company funded the establishment of Qipai Xinjing Technology Co., Ltd., and purchased wafer testing equipment one after another to begin providing customers with wafer testing services. As of the 2024 mid-year report, the company has completed the development of dozens of wafer test solutions, including test development and mass production of product series such as power management chips, MCUs, third-generation semiconductors, and Nor-Flash, further improving the layout of the company's one-stop sealing and testing services. In addition, the R&D of the company's power packaging project is progressing smoothly. Some products have been mass-produced and delivered steadily, and successfully contributed to revenue in 2023. With the further advancement of the company's R&D projects, the wafer testing business and power device packaging are expected to become the driving force for the next phase of the company's growth.

Profit forecast: The company's net profit for 2024-2026 is expected to reach -0.06/0.02/0.05 billion yuan, an increase of 52%/132%/127% year-on-year. First coverage, giving a “buy” rating.

Risk warning: 1) New product development falls short of expectations; 2) downstream recovery falls short of expectations; 3) production capacity cannot be absorbed as expected.