Event description

On October 15, Weice Technology announced the "Shanghai Wetest Semiconductor Technology Co., Ltd. 2024 Third Quarter Report", in the first three quarters of 2024, the company achieved operating income of 740 million yuan, a year-on-year increase of +43.62%, and a net profit attributable to the parent company of 62 million yuan, a year-on-year increase of -30.81%.

Event Comment The

return of the early expansion is finally showing, and the growth of the industry is adding another east wind. The company adheres to the forward-looking strategic layout of capacity expansion, and continues to expand the testing capacity and technology iteration of high-end chips such as AI, GPU, CPU and other high-computing power chips, as well as high-reliability chips such as industrial and automotive electronics, and the company has crossed the business inflection point and achieved significant growth under the trend of gradual recovery of demand in the global semiconductor industry, and the company achieved operating income of 740 million yuan in 2024Q1~Q3, a year-on-year increase of +43.62%, of which 3.10 was achieved in a single quarter in 2024Q3 The operating income of 100 million yuan increased by 52.47% year-on-year and 26.03% month-on-month, and the single-quarter performance hit a record high; At the same time, with the improvement of the company's overall utilization rate and the high-end product structure, the company's net profit attributable to the parent company has increased significantly, and the net profit attributable to the parent company in 2024Q3 reached 51 million yuan, a significant increase of 171.09% and 358.34% year-on-year respectively, driving the net profit attributable to the parent company in 2024Q1~Q3 to increase to 62 million yuan, a significant year-on-year decline.

The utilization rate & gross profit margin have increased significantly, and the high-end products have achieved remarkable results. In the first half of 2024, the proportion of high-end product testing was 67%, the proportion of mid-range product testing was 33%, the proportion of high-end product testing in the third quarter increased significantly to 73%, the proportion of mid-range product testing was 27%, and the proportion of high-end products is expected to further increase in the fourth quarter. Driven by the high-end products, the company's utilization rate continued to increase, and the gross profit margin increased significantly, with the gross profit margin rising to 42.45% in 2024Q3, +3.08pct year-on-year and +12.39pct quarter-on-quarter, driving the net profit margin to reach 16.48% in a single quarter, +7.21pct year-on-year and +11.95pct quarter-on-quarter. With the continuous recovery of the semiconductor industry and the continuous expansion of high-end demand, the proportion of high-end products in the company's future product structure is expected to increase, driving the gross profit margin to continue to rise. The

high-end test of the convertible bond project has been increased, and the growth space has been opened. The company previously announced the convertible bond project, and plans to further purchase high-end core machines, such as Advantest V93000 EXA, Advantest V93000, Advantest T5830, Teradyne UltraFlexPlus, Teradyne UltraFlex and other high-end test machines Nearly 200 sets, as well as nearly 200 sets of equipment such as three-temperature probe stations, three-temperature separators and aging test equipment required for "high-reliability chip testing", giving priority to serving high-computing power chips (CPU, GPU, AI, FPGA), advanced architecture and advanced packaging chips (SoC, Chiplet, SiP) test requirements, "high reliability chip testing" priority to serve the test needs of automotive-grade chips and industrial-grade chips. Combined with the company's continuous investment in R&D, such as the research project "93K and J750 platform based test solution development (phase IV)" (development of CPU, GPU, MCU and other test technologies), "artificial intelligence chip reliability verification platform (phase III)", "high-performance chiplet chip finished product test solution" and other technologies continue to land, high-end test capacity & advanced technology is expected to further enhance the company's competitive advantage and market share, in AI Under the background of the increasing demand for advanced packaging and testing as the core, the company has entered a stage of high growth.

We expect the company's operating income from 2024 to 2026 to be 11.20, 13.80, and 1.630 billion yuan respectively, and the net profit attributable to the parent company to be 1.28, 2.16, and 308 million yuan respectively, and the corresponding PE is 53X, 32X, and 22X, giving a "buy" rating.



Risk Reminder 1: The downstream demand for semiconductors is less than expected;

2. The risk that the issuance and investment progress of convertible bonds are not as expected.