The first annual financial report of the Science and Technology Innovation Board and the semiconductor equipment industry in 2024 was officially released.

On the evening of February 26, Shengmei Shanghai (688082.SH), a semiconductor equipment platform company, released its 2024 annual report.

According to the report, Shengmei Shanghai's revenue in 2024 will be about 5.618 billion yuan (RMB, the same below), a year-on-year increase of 44.48%, and the net profit attributable to the parent company during the period will be about 1.153 billion yuan, a year-on-year increase of 26.65%. Both revenue and net profit hit a record high, demonstrating the company's strong development momentum.

It is worth noting that the net profit attributable to the parent company of Shengmei Shanghai is calculated on the basis of including the share-based payment expenses, and if the impact of the share-based payment expenses is excluded, the net profit attributable to the parent company of Shengmei Shanghai in 2024 can reach 1.444 billion yuan, a year-on-year increase of 35.48%. This is a clearer indication of the actual profitability of SEM Shanghai after excluding equity incentive factors, and a better reflection of the strong growth momentum of the company's business operations.

With the disclosure of this annual report, a number of brokerages have released research reports expressing optimism about the future development of Shengmei Shanghai. Among them, Nomura Oriental International said that the strong local demand supports the high growth of Shengmei Shanghai cleaning equipment, and it maintains an "overweight" rating on Shengmei Shanghai and raises the target price to 132 yuan. At the same time, Qunyi Securities gave Shengmei Shanghai a "buy" rating with a target price of 140 yuan.

But in the longer term, the value of Shanghai is much more than that. After continuing to promote the three core strategies of "technology differentiation, product platformization, and customer globalization", SEM Shanghai has successfully built a solid competitive barrier, which has laid a solid foundation for it to take advantage of the high prosperity of the industry in the next few years and release huge growth potential, which is not only expected to consolidate SEM Shanghai's leading position in the field of semiconductor equipment, but also drive the company's value to continue to fission in the capital market.

Q4 performance accelerated growth, and the number of patent applications increased by nearly 90% throughout the year

After experiencing a slowdown in the development of the industry in 2022 and 2023, thanks to the explosion of generative AI technology, the recovery of consumer electronics markets such as smartphones and AI PCs, and the continuous growth of downstream market demand such as automotive electronics and the Internet of Things, the global semiconductor equipment industry will finally gradually come out of the trough in 2024 and usher in a recovery trend.

According to SEMI (International Semiconductor Industry Association) data, the global semiconductor equipment market is expected to reach $109 billion in 2024, a year-on-year increase of 3.4%, and the growth rate in 2023 will be -1.3%, and the trend of industry recovery has been very obvious. In this context, the strong growth momentum of Shengmei Shanghai has ushered in an accelerated release, which is reflected in detail in the 2024 financial report.

In terms of annual financial data, while Shengmei Shanghai's revenue and net profit in 2024 will reach a record high, Q4 has ushered in a significant accelerated growth trend compared with Q3. In Q4, Shengmei Shanghai's revenue was 1.641 billion yuan, a year-on-year increase of 44.14%, which was more than 6 percentage points higher than the growth rate of 37.96% in Q3, and the revenue increased by 4.34% month-on-month compared with Q3.

Source: Shengmei Shanghai 2024 Annual Report

At the same time, the non-net profit deducted by Shengmei Shanghai in Q4 was 368 million yuan, a year-on-year increase of 61.29%, which was nearly 30 percentage points higher than the growth rate of 31.41% in Q3, and the non-net profit deducted in Q3 also increased by 20.15% month-on-month.

At a time when the performance hit a record high, the net cash flow generated by Shengmei Shanghai's operating activities in 2024 will turn from negative to positive to reach 1.216 billion yuan, which is also the highest level in history, of which the net inflow in Q4 alone will reach about 649 million yuan.

The doubling of net cash flow was mainly due to an increase in sales receipts and an increase in advance receipts due to an increase in sales orders. The growth of advance receipts shows that the market demand for Shengmei Shanghai products is still strong, which can also be supported by the company's contract liabilities.

As a key indicator with forward-looking guidance on future revenue changes, contract liabilities reflect the size of the company's outstanding orders during the period. As of December 31, 2024, the amount of contract liabilities of Shengmei Shanghai was 1.106 billion yuan, a year-on-year increase of 26.21%. The abundant orders in hand, coupled with the subsequent development of new orders, are expected to continue to promote the company's rapid growth.

In addition, the continuous high R&D investment to build competitive barriers is also a highlight in the 2024 financial report of Shengmei Shanghai. During the reporting period, the R&D investment of Shengmei Shanghai was 838 million yuan, a year-on-year increase of 27.36%, and continued to maintain a high investment level.

The significant increase in the number of patents not only reflects the remarkable results of Shengmei Shanghai's high R&D investment, but also an important indicator of its continuous competitiveness. In 2024, SEM Shanghai and its holding subsidiaries applied for a total of 311 patents, an increase of 89.63% over the previous year. By the end of 2024, Shengmei Shanghai had applied for a total of 1,526 patents, an increase of 37.11% over the previous year.

Obviously, whether it is performance, cash flow, R&D investment and patent applications, it conveys to the market the "gold content" of Shengmei Shanghai's 2024 financial report, which is a high-quality report card that takes into account the high growth of current performance and the accumulation of future growth potential. Combined with the future development trend of the industry and the growth path of Shengmei Shanghai, the high growth potential of Shengmei Shanghai is expected to continue to accelerate.

Diversified products have accelerated their volume to help make performance growth more flexible

From the industry level, it is a definite event that the semiconductor equipment market will enter a high boom cycle from 2024. According to SEMI's previous industry report, global semiconductor equipment capital expenditure will increase by 24% to $123 billion in 2025, and it is expected that in the three years from 2025 to 2027, the global semiconductor manufacturing industry's capital expenditure on semiconductor equipment will reach a staggering $400 billion.

In this tide of global demand for semiconductor equipment, China will become the leader. It is estimated that the capital expenditure of Chinese semiconductor manufacturers on semiconductor equipment will exceed 100 billion US dollars in the next three years, and China will become the world's largest semiconductor equipment market.

There is no doubt that China's semiconductor equipment industry has entered a period of strategic development opportunities for the industry, and China's semiconductor equipment companies are expected to usher in accelerated growth. Among the many listed semiconductor equipment companies, SEM Shanghai is expected to become one of the companies with the most potential for stock price growth in the next two or three years, precisely because SEM Shanghai has built a solid competitive barrier under the continuous promotion of the three major strategies, and promoted SEM Shanghai to enter the accelerated release period of diversified products.

Shengmei Shanghai, which started with cleaning equipment, has extended its product system to seven major sectors, including electroplating equipment, advanced packaging wet equipment, vertical furnace equipment, gluing and developing equipment, PECVD equipment and panel-level packaging equipment, covering a potential market space of about 20 billion US dollars.

In the middle of 2024, SEM Shanghai will continue to deepen the cleaning equipment market, and accelerate the launch of various types of new equipment while continuously optimizing the performance of cleaning equipment. During the reporting period, the Ultra C Tahoe achieved an important performance breakthrough in the cleaning equipment product of Shengmei Shanghai, which can achieve the effect of a stand-alone wafer cleaning equipment in the medium and low temperature sulfuric acid (SPM) cleaning process, and can reduce chemical consumption by up to 75%. The significant breakthrough in the performance of this equipment is expected to further consolidate Shengmei Shanghai's leading position in the cleaning equipment market.

At the same time, in 2024, Shengmei Shanghai has successively launched a framed wafer cleaning equipment for advanced packaging, an Ultra C vac-p negative pressure cleaning equipment for fan-out panel level packaging applications, and a new Ultra C bev-p panel edge etching equipment for fan-out panel level packaging (FOPLP) applications. In addition, the plasma-enhanced atomic layer deposition furnace tube launched by CM Shanghai has entered two integrated circuit wafer fabs in China, and is being updated, optimized and prepared for mass production.

Shengmei Shanghai said that in the next two or three years, Tahoe equipment (monolithic trough combination equipment), high-temperature monolithic SPM equipment and edge etching equipment, panel-level packaging equipment are expected to become new growth points, electroplating, furnace and other equipment will join the main revenue force, and at the same time, PECVD and Track equipment will also begin to usher in large volumes.

It is worth noting that the Lingang project of SEM Semiconductor Equipment R&D and Manufacturing Center has been officially completed and partially put into operation in October 2024. The annual output value of plant A can reach more than 5 billion, and plant B is expected to be put into operation this year, and the two plants can achieve a production capacity of 10 billion, which will break the constraints of production capacity on the rapid development of Shengmei Shanghai and support the company's production capacity demand for diversified products.

At this point, the layout of Shengmei Shanghai has been clear and clear, when the industry has entered a period of high-prosperity strategic development, it coincides with the harvest period of Shengmei Shanghai entering the harvest period of diversified products, and the accelerated volume of diversified products will also promote the continuous acceleration of the company's platform construction, which will not only make the performance of Shengmei Shanghai more flexible, but also the increase in the proportion of non-cleaning equipment revenue will also make the product structure of Shengmei Shanghai more balanced, enhance customer stickiness and enhance the company's competitiveness, so as to lay a solid foundation for the company's long-term development.

Summary

From a valuation perspective, as of March 5, 2025, the PE of Shengmei Shanghai is 40.52 times, and based on the competitive barriers and future growth potential formed by the strategic layout of the platform, it is expected that the valuation of Shengmei Shanghai will have higher growth space.

This means that in the next two to three years, the share price of SEMEI Shanghai is expected to usher in sustained high growth, and the continuous and stable dividend policy will further enhance the investment value of SEMEI Shanghai.

In the 2024 financial report, Shengmei Shanghai has stated that it intends to pay a dividend of 6.57 (tax included) per 10 shares, with a total cash dividend of about 288 million yuan (tax included), and the cash dividend amount accounts for 25% of the net profit attributable to shareholders of the parent company in the current period.

The continuous dividend policy reflects the good profitability, cash level and emphasis on shareholder returns, and the dividend will also significantly increase the long-term stable capital allocation demand for the company, and now may be a good time for the long-term layout of the company.