Core view

2024H1 The company's operating income grew steadily, and the excellent performance in Q2 drove the overall performance growth in the first half of the year, and the company's new sales orders and shipments increased significantly year-on-year, and the new sales orders in Q2 also increased significantly compared with Q1, laying the foundation for subsequent revenue growth. The company continues to expand new products and new processes, continues to promote the optimization and upgrading of equipment and reaction chambers, and the shipment of equipment in 2024H1 has increased significantly, and the operation performance of the equipment in the client production line is stable.

Event

2024H1 The company achieved revenue of 1.267 billion yuan, a year-on-year increase of 26.22%; net profit attributable to the parent company was 129 million yuan, a year-on-year increase of 3.64%; deducted non-net profit of 20 million yuan, a year-on-year decrease of 69.38%.

In a single quarter, the company achieved revenue of 795 million yuan in 2024Q2, a year-on-year increase of 32.22%; the net profit attributable to the parent company was 119 million yuan, a year-on-year increase of 67.43%; deducted non-net profit of 64 million yuan, a year-on-year increase of 40.90%.

Brief Comment

2024Q2 performance has improved significantly, and the follow-up growth support is strong

Shipment machines have successively achieved revenue conversion, and revenue has achieved steady growth. In 2024H1, the company achieved revenue of 1.267 billion yuan, a year-on-year increase of 26.22%; The shipment amount was 3.249 billion yuan, a year-on-year increase of 146.50%, benefiting from the company's continuous and high-intensity R&D investment, and new products and processes such as ultra-high aspect ratio trench filling CVD equipment, PE-ALD SiN process equipment, HDPCVD FSG, HDPCVD STI process equipment have been verified and introduced by downstream users, and the company's revenue has grown steadily. The company's product layout has gradually improved, customer recognition has continued to rise, and the shipping machines have successively achieved revenue transformation.

R&D and selling expense ratios increased, and profitability declined. In terms of profitability, the company achieved a gross profit margin of 47.05% in 2024H1, a year-on-year increase of -2.38pct, mainly due to the early investment in new products and the large cost in the process of yield improvement. On the expense side, the total expense rate during the period was 44.83%, +4.13pct year-on-year, of which the sales, management, R&D, and financial expense rates were 12.61%, 5.26%, 24.81%, and 2.15%, respectively, and +1.18pct, -4.17pct, +3.88pct, and +3.24pct year-on-year. The company continued to promote R&D investment, and the R&D expenses in 2024H1 reached 314 million yuan, a year-on-year increase of 49.61%; In order to support the rapid growth of business scale and quickly respond to customer needs, sales staff salaries and other expenses have increased, and sales expenses in 2024H1 will reach 160 million yuan, a year-on-year increase of 39.24%. On the profit side, in 2024H1, the company achieved a net profit attributable to the parent company of 129 million yuan, a year-on-year increase of 3.64%, and a net profit attributable to the parent company of 119 million yuan in Q2, a year-on-year increase of 67.43%.

The number of new orders signed increased significantly, and the follow-up revenue growth was strongly supported. In 2024H1, the company's new sales orders and shipment value both increased significantly year-on-year, and the new sales signed in Q2 also increased significantly compared with Q1. The contract liabilities corresponding to the advance receipts reached 2.038 billion yuan at the end of the period, a year-on-year increase of 47.49%. In addition, the balance of goods issued by the company was 3.162 billion yuan, an increase of 63.50% compared with the balance of 1.934 billion yuan issued at the end of 2023, laying a good foundation for subsequent revenue growth.

New products and new processes continue to expand, equipment shipments have increased significantly, new products and new processes continue to expand, and continue to promote the optimization and upgrading of equipment and reaction chambers. The company continues to expand new products and processes, including ultra-high aspect ratio trench filling CVD equipment, PECVDBianca process equipment and bond register accuracy measurement products, and continues to optimize and upgrade equipment platforms and reaction chambers, including new equipment platforms (PF-300TPlus and PF-300M) and new reaction chambers (pX and Supra-D). As of the end of 2024H1, the company's PECVD, ALD, SACVD, HDPCVD and ultra-high aspect ratio trench-filled CVD thin film equipment can support more than 100 process applications of all dielectric thin film materials required in logic chips and memory chips.

The company's equipment shipments have increased significantly, and the equipment has been running steadily in the client's production line. In the first half of 2024, the company shipped more than 430 reactors; As of the end of 2024H1, the company has shipped more than 1,940 reactors (including more than 130 new reactors pX and Supra-D) and entered more than 70 production lines. According to the company's 2024 interim report, it is expected to ship more than 1,000 reactors in 2024, which will hit a record high. The company's equipment has excellent performance in the production and operation stability of the client production line, and the average uptime of the machine is more than 90% (reaching the international level of similar equipment).

As of the end of 2024H1, the cumulative tape-out volume of products produced by the company's thin film deposition equipment in the client production line has exceeded 194 million pieces. The

fund-raising project is progressing smoothly, and the Lingang ALD equipment R&D and industrialization project has been put into use, and the company continues to promote the construction of the fund-raising investment project, and the three major fund-raising projects are progressing smoothly. (1) ALD equipment R&D and industrialization project: purchase a plant to build a R&D and production base in Shanghai Lingang New Area, as of the end of 2024H1, the plant renovation has been completed and put into use, the R&D and production related work of ALD equipment has been carried out, and the fundraising project has been completed; (2) R&D and industrialization project of advanced semiconductor process equipment: build a R&D and industrialization base in Shanghai Lingang New Area for the research and development of advanced semiconductor thin film deposition equipment and technology, and realize the industrialization of semiconductor equipment required by Lingang as the central customer group, and the overall construction of the base is expected to be completed by the end of 2024 and put into use before June 2025; (3) High-end semiconductor equipment industrialization base construction project: The company has completed the payment of the project planning land as of August 27, 2024, by purchasing land in Hunnan District, Shenyang City, including production clean rooms, three-dimensional warehouses, testing laboratories, etc.

Investment Suggestions

It is estimated that the company's operating income from 2024 to 2026 will be 39.47, 54.07 and 6.830 billion yuan respectively, an increase of 45.92%, 37.00% and 26.30% year-on-year respectively, and the net profit attributable to the parent company will be 7.00, 1.024 and 1.404 billion yuan respectively, an increase of 5.70%, 46.20% and 37.14% year-on-year respectively, and the corresponding PE will be 48.88x, 33.44x, 24.38x, maintaining a "buy" rating.

Risk analysis

(1) Downstream expansion is less than expected: the company's customers include well-known manufacturers at home and abroad, and if the downstream investment and expansion willingness are reduced, the company's product sales will be affected.

(2) Intensification of trade frictions: The intensification of trade frictions between China and the United States may adversely affect the company's overseas customer expansion.

(3) New product development is less than expected: If new product development is less than expected, it will have a negative impact on its subsequent revenue.

(4) Market competition continues to intensify: the company's competitors are internationally renowned semiconductor equipment manufacturers and domestic new semiconductor equipment companies, if the company can not effectively respond to the market competition environment, it will face adverse effects such as declining industry status.