Investment Highlights

Panel Testing Leader, Semiconductor/New Energy Opens Growth Space

Huaxing Yuanchuang's business covers the testing fields of flat panel displays, semiconductors, new energy vehicle electronics and smart wearable devices, and has a leading share in the field of testing equipment for the middle and rear processes of flat panel displays. In 2023, the company will achieve revenue of 1.86 billion yuan and net profit attributable to the parent company of 240 million yuan. The company actively lays out the field of semiconductor/new energy testing and has become the designated supplier of Tesla. With the opening of the subsequent OLED 8th generation line production capacity construction cycle and the introduction of testing equipment in the semiconductor/new energy field, the company is expected to achieve continuous growth in performance.

The 8th generation line construction cycle opens, opening up the space for flat panel

display testing equipment In the field of flat panel testing equipment, the company occupies a leading position in the Cell/Module process testing equipment in the AMOLED industry in Chinese mainland with a market share of 32%. With the construction of the 8th generation line of the downstream core panel factory and the rapid development of the AR/VR market, the company's tablet detection business will usher in new growth opportunities. In addition, IDC estimates that global AR/VR shipments will grow at a CAGR of 36% from 2024 to 2028. Through its wholly-owned subsidiary, Huaxing Olitong, the company has expanded the assembly and testing business of smart watches and wireless headphones, and has established a close cooperative relationship with Apple, which is expected to continue to grow.

According to Sullivan data, China's semiconductor testing equipment market is expected to grow to 26.74 billion yuan in 2027, of which the value of testing machines accounts for 63% of the test equipment. The company's self-developed T7600 tester has reached the level of mid-end SoC testers of international manufacturers, and the main customers of the tester are Samsung, Weir and other head customers. With the continuous research and development of the company's products and the introduction of customers, related orders are expected to grow, and the domestic substitution process of the company's semiconductor business is expected to accelerate.

The new energy vehicle testing equipment market is developing steadily, and the testing equipment continues to benefit

According to the forecast of Future Market Insights and Sihan Data, the global automotive testing equipment market will reach US$3.1 billion in 2022, of which the Chinese market size will be about 6.883 billion yuan. As Tesla's designated supplier, the company has successfully established a variety of new energy vehicle testing solutions and has rich product research and development capabilities. With the continuous growth of new energy vehicle production and sales and the iterative upgrading of related technologies, the company's new energy vehicle testing business is expected to continue to grow.

Earnings Forecast and Valuation

We expect the company's revenue from 2024 to 2026 to be 20/23/2.7 billion yuan, a year-on-year increase of 7.6%/15.9%/15.6%, with a CAGR of 13%; It is estimated that the net profit attributable to the parent company from 2024 to 2026 will be -4.8/2.5/300 million yuan, with a year-on-year growth rate of -300.7%/152.3%/19.9% and a CAGR of 8%. PE in 2024-2026 is -/56/47x, respectively. Considering the company's leading position in panel testing and the growth potential of the semiconductor/new energy field, the first coverage is given an "overweight" rating.

Risk Warning:

Downstream demand is less than expected, and the construction of the 8th generation line is less than expected.