24-year full-year results in line with market and our expectations

Shengmei Shanghai released its 2024 annual report: revenue in 2024 will be 5.618 billion yuan, a year-on-year increase of 44.48%, which is within the range of 56~5.88 billion yuan in the company's guidance in January 25; The net profit attributable to the parent company was 1.153 billion yuan, a year-on-year increase of 26.65%, and the net profit not attributable to the parent company was 1.109 billion yuan, a year-on-year increase of 27.79%, which was basically in line with the market and our expectations.

Development trend

In 24 years, the company's cleaning equipment revenue was 4.057 billion yuan, a year-on-year increase of 55.2%; the revenue of advanced packaging equipment was 246 million yuan, a year-on-year increase of 53.5%; The revenue of other semiconductor equipment (electroplating, vertical furnace tubes, stress-free copper polishing equipment, etc.) was 1.137 billion yuan, a year-on-year increase of 21.0%. Basically in line with our previous analysis, cleaning equipment and electroplating equipment are still the core sources of the company's revenue growth. Considering the company's cooperative relationship with Huahong Group and the expansion of Huahong Group in 24 years, we believe that Huahong Group may contribute a certain amount of revenue to the company in 24 years.

In 24 years, the gross profit margin of the company's cleaning equipment was 46.17%, a year-on-year decrease of 1.10ppt, the gross profit margin of advanced packaging equipment was 28.81%, a year-on-year increase of 1.19ppt, and the gross profit margin of other semiconductor equipment was 59.33%, a year-on-year decrease of 11.96ppt. Considering the impact of product structure, customer differences, material costs and other factors, the company's comprehensive gross profit margin fell slightly by 1.1ppt to 48.9% in 24 years, but the overall situation is still at a high level, and we speculate that the company's electroplating equipment in the front process will make a positive contribution to the gross profit margin. In 24 years, the company's sales/management/R&D expenses accounted for 25.8% of revenue, a decrease of 3.6ppt from 29.4% in 23 years, and the scale effect appeared.

In the fourth quarter, the company consolidated about 500 million yuan, fixed assets increased from 689 million yuan at the end of the previous quarter to 1.167 billion yuan, and the construction in progress decreased from 963 million yuan at the end of the previous quarter to 592 million yuan, reflecting the Lingang R&D and manufacturing center began to be put into use. In 24 years, the company's depreciation and amortization was 98 million yuan, a slight increase from 85 million yuan in the previous year, and we believe that the impact of new depreciation and amortization is basically limited. In September 24, the company announced that the orders in hand were 6.764 billion yuan, considering that the company's contract liabilities at the end of the fourth quarter were 1.106 billion yuan, a further increase from 921 million yuan at the end of the previous quarter, or reflecting the further increase in orders in hand in the fourth quarter.

Looking forward to the future, we believe that the domestic substitution of cleaning equipment and electroplating equipment in the short and medium term is still the main line of the company's performance growth, and the medium and long-term ALD furnace tube, Track, PECVD, and going overseas are expected to become the second growth curve.

Earnings Forecast and Valuation

We basically maintain the company's earnings forecast unchanged, and expect the company's revenue in 25/26 to increase by 21.8%/18.8% year-on-year to 68.44/8.130 billion yuan (the company's guidance for full-year revenue in January 25 is 6.5~7.1 billion yuan), and the net profit attributable to the parent company will increase by 33.3%/21.6% year-on-year to 15.37/1.869 billion yuan. Using the P/E method to value the company, the current stock price corresponds to 32.3x/26.5x P/E in 25/26, the target price remains unchanged at 118.19 yuan, and the target price corresponds to 33.7x/27.7x P/E in 25/26, with 5% upside, and the outperform rating remains unchanged.

Risks

Downstream capital expenditure is lower than expected / new product expansion is less than expected / market competition intensifies / Sino-US trade frictions.