Incident Overview

The company released its 2024 mid-year report.

Domestic demand is strong & overseas is gradually recovering. The 24H1 revenue side achieved a high growth of 2024H1. The company achieved operating income of 1.506 billion yuan, +81.8% year over year, of which Q2 achieved revenue of 0.805 billion yuan, +65.2% year over year, in line with the median value previously forecast. By region, 1) Domestic: 24H1 achieved revenue of 1.086 billion yuan, accounting for 75% of revenue, +10.7pct year-on-year, with a rapid increase in domestic revenue, mainly due to strong domestic market demand and the release of company reserves and production capacity one after another; 2) Overseas: 24H1 achieved revenue of 0.361 billion yuan, +24.3% YoY, with a revenue share of 25 pct. The year-on-year improvement in overseas revenue was significant, mainly due to increased demand from overseas storage customers. By product, the four major product lines all achieved relatively rapid growth. 1) Module products: 24H1 achieved revenue of 0.579 billion yuan, +68.0% year over year, accounting for 40% revenue, -2.2pct year; 2) Structural components: 24H1 achieved revenue of 0.39 billion yuan, +91.7% year on year, accounting for 27% of revenue, which was basically the same year on year; 3) Process components: 24H1 achieved revenue of 0.333 billion yuan, +70.7% year over year, accounting for 23%, year-on-year- 0.9 pct; 4) Gas management: 24H1 achieved revenue of 0.145 billion yuan, +98.7% year over year, accounting for 10% of revenue, +1.1 pct year on year. As of the end of 24H1, the company's accounts receivable were 1.179 billion yuan, +98.3% year over year, mainly due to the increase in the proportion of domestic customers with high year-on-year orders and slow repayment; net operating cash flow was -0.1 billion yuan, which was -0.3 billion yuan in the same period last year, a significant year-on-year improvement, indicating that customer repayment conditions continued to accelerate. As industry demand continues to recover and revenue recognition accelerates, 24H2's revenue side is expected to maintain high growth.

The scale effect drove the decline in the cost ratio. The net profit after deducting the level of nonprofit increased significantly. 2024H1 achieved net profit to mother of 1.22 million yuan and 112 million yuan, respectively, compared with +27.3% and 346%, respectively. Among them, Q2 realized net profit to mother and net profit of 0.61 million yuan and 58 million yuan, respectively, compared with +9.0% and 171%, respectively. The growth rate declined in a single quarter. The main reason was that Q2 companies accrued asset & credit impairment losses totaling 22.23 million yuan in the same period last year. Just $0.25 million.

2024H1's net sales interest rate and net sales margin after deduction were 6.92% and 7.46%, -4.81 pct and +4.42 pct, respectively. The actual profitability increased significantly. 1) On the gross margin side, 24H1's gross sales margin was 26.29%, -1.26pct; Q2's gross sales margin was 27.07%, +0.68pct year over year, and +1.68pct month-on-month, an improvement of significant.

2) On the expense ratio side, the 24H1 company's cost rate for the period was 20.35%, -3.33pct year on year. Among them, sales/management/R&D/finance cost ratios were -0.43/+0.83/-4.27/+0.54 pct year on year, respectively, and the cost control capacity was improved. 3) 2023H1's non-recurring profit and loss was 70.49 million yuan, and 24H1 was only 9.42 million yuan, so we infer that the sharp year-on-year decrease in non-recurring profit and loss was the main factor in the decline in net interest rates.

Four categories of products are fully covered, and production capacity is actively expanding to open up growth space 1) Product side: The company is one of the few precision parts manufacturers in the world that can be mass-produced and applied to 7nm process semiconductor equipment. The products mainly include process components, structural components, module products, and four categories of gas management, covering core equipment such as etching, film deposition, track, and CMP. According to the company's prospectus, the company's representative process components are cavities, liners, and diffusers, which can all be applied to 7nm semiconductor etching and deposition equipment, and is the only domestic component manufacturer certified by mainstream international customers. Some of the company's structural components have also been introduced to the 7nm process, and there are no domestic companies other than the company that have passed certification from mainstream international customers and internationally renowned flowmeter manufacturers. Module products not only need to meet the technical requirements of components, but also meet customer customization requirements. The company is also the only domestic manufacturer that has passed the certification of mainstream international customers.

2) Production capacity construction situation: The company's customer supply chain includes internationally renowned semiconductor equipment leaders and leading domestic manufacturers such as Beifang Huachuang, Zhongwei, etc. In order to better respond to customer needs, the company lays out production capacity in Shenyang, Beijing and Nantong. As the main production base, Shenyang's production capacity is close to saturation. In order to strengthen cooperation with customers such as Huachuang in the North, the company built a new production room in Beijing and purchased supporting equipment for the entire process. Production capacity at the 2024H1 plant in Nantong was gradually released and began to contribute to performance. Overseas, the company has set up a wholly-owned subsidiary in Singapore and built factories in the US to further expand the scale of the company's overseas business and enhance global supply chain procurement capabilities to meet the rapidly growing demand in the parts market.

Investment advice

In summary, we expect the company's 2024-2026 revenue to be 33.45, 43.90 and 5,526 billion yuan, respectively, with year-on-year growth rates of 61.9%, 31.2% and 25.9% respectively; 2024-2026 net profit to mother of 3.28, 4.46 and 568 million yuan, with year-on-year growth rates of 94.2%, 36.2% and 27.2% respectively; and EPS in 2024-2026 at 1.06, 1.45 and 1.84 yuan. Considering that the company is the largest and most diverse component leader in China, production capacity continues to expand. On 2024/9/6, the stock price of 32.09 yuan corresponds to PE of 30, 22, and 17, respectively. It was covered for the first time, giving it an “increase in wealth” rating.

Risk warning

The semiconductor industry's boom fluctuates, market competition intensifies, etc.