Introduction to this report:

Q3 performance slightly exceeded expectations, equipment acceptance accelerated; CMP equipment continued to be iterated, platform-based layout progressed steadily; production capacity layout improved, and parts localization accelerated.

Key points of investment:

Maintain an increase in holdings rating: Maintain an EPS of 4.25/5.45/7.08 yuan unchanged for 24-26 years. Referring to the average PE value of a comparable company in 25 years, the company was given 41 times PE in 25 years. The corresponding target price was 223.45 yuan (previous value was 159.32 yuan), maintaining an increase in holdings rating.

Q3 Performance slightly exceeded expectations, and equipment acceptance accelerated. 24Q1-Q3 achieved revenue of 2.452 billion yuan/ +33.22%, net profit attributable to mother of 0.721 billion yuan/ +27.8%, after deducting 0.615 billion yuan/ +33.85% from non-return mother. Single 24Q3 achieved revenue of 0.955 billion yuan/ +57.63%, net profit of 0.288 billion yuan/ +51.74%, deducting non-return of 0.246 billion yuan/ +62.36%. The market share of CMP equipment continues to increase, and key consumables, maintenance, wafer recycling, and wet processing equipment are gradually being released. These factors together drive the company's revenue growth. 24Q1-Q3 gross profit margin 45.82% /-0.64pct, net profit margin 29.4% /-1.24pct. For 24Q1-Q3, the company received 0.113 billion yuan in software VAT refunds and 0.078 billion yuan in VAT credits, respectively. 24Q1-Q3 sales/management/R&D expenses were 6.06%/5.10%/10.42%, respectively, and +0.81/-0.42/-1.19pct year-on-year, respectively. In addition to the increase in sales expenses due to increased product deliveries, the other two have been accompanied by a steady decline in revenue volume.

CMP equipment continues to be iterated, and the platform-based layout is progressing steadily. 1) CMP equipment: In the first half of '24, the company's high-performance CMP machine Universal H300 was shipped in small batches. 2) Thinning equipment: Versatile-GP300 has obtained batch orders from multiple head front-end fab factories; Versatile-GM300 has been sent to domestic head sealing and testing plants for verification. 3) Cutting equipment: The Versatile-DT300, a 12-inch wafer edge cutting device for advanced manufacturing processes and advanced packaging, was launched and has been sent to many customers for verification. 4) Cleaning equipment: The brush cleaning equipment used in 4/6/8 inch compound semiconductors has been tested for the first time. 5) Film thickness measurement equipment: Obtain batch repeat orders from leading companies.

Improve the production capacity layout and accelerate the localization of parts. 1) Production capacity layout: Both the Beijing base and the Tianjin base are expected to be completed and tested by the end of 24, which is expected to drive an increase in CMP, thinning, and cleaning equipment production capacity. In addition, the company plans to invest 1.698 billion to build a new base in Lingang, Shanghai.

2) Parts: The company continues to promote the localization of parts. It has completed the localization development of core components such as thin equipment spindles and porous suction cups, and has partially met mass production conditions. In addition, the company established Huahai Qingke (Guangzhou) to build an incubation platform for key components of semiconductor equipment.

Risk warning: semiconductor industry cycle fluctuations, domestic substitution, and company product development falling short of expectations.