Value discovery of Shengmei Shanghai: the leader of domestic semiconductor cleaning equipment

Founded in 2005, Shengmei Shanghai focuses on the research and development of semiconductor cleaning equipment, and the company has made breakthroughs in the field of wet cleaning, and has emerged in electroplating and copper polishing equipment. The company's revenue growth rate in the past three years has been rapid, from 254 million yuan in 2017 to 1.007 billion yuan in 2020, with a compound annual growth rate of 58%. With advanced self-developed products, the company has established close cooperative relations with a large number of internationally renowned enterprises, Huahong Group, Yangtze River Storage, SK Hynix, Changxin Storage and other enterprises are the company's long-term partners, and have obtained orders with a number of overseas new customers since 2021.

There is a wide space for domestic substitution of cleaning equipment. Chinese mainland the semiconductor industry has entered a golden period of development, as an easier to achieve localization link, cleaning equipment ushered in a good opportunity for development. In 2020, the local cleaning equipment market size was 936 million US dollars, and the CAGR in 2016-2020 was as high as 30.47%, showing a rapid development momentum. In the short term, the expansion of Chinese mainland fabs has not decreased, and of the 29 new fabs built worldwide from 2021 to 2022, 8 are located in Chinese mainland, which will effectively drive the demand for cleaning equipment; In the medium and long term, under the background of technological upgrading, the chip process will increase, the structure will be complicated, the demand for semiconductor cleaning and technical difficulty will be significantly improved, and the demand for cleaning equipment is expected to rise in volume and price. From the perspective of competition pattern, the global cleaning equipment market is dominated by DNS, TEL, Lam and other overseas leaders, the total market share of the three companies in 2019 is close to 90% (by sales), Shengmei has achieved a domestic substitution breakthrough in China, and in 2019, the proportion of winning bids in Chinese mainland bidding (by quantity) reached 20.5%, second only to DNS, driven by the dual logic of market demand and domestic substitution, the company's semiconductor cleaning equipment market share is expected to continue to increase and has the potential for sustained growth.

The company's differentiated technical route has been recognized by the market, and the domestic penetration rate has gradually increased. SAPS technology with functional water ensures the uniform cleaning of megasonic waves; TEBO technology ensures damage-free cleaning through the effective use of cavitation effect; Tahoe combination cleaning combines effectiveness and efficiency. At present, the company's cleaning equipment has been recognized by many mainstream semiconductor companies at home and abroad, and has established a stable cooperative relationship, and a good reputation has helped the company's equipment to usher in the volume. In addition, Shengmei also has a long period of technical accumulation in the fields of copper plating, copper polishing, vertical furnaces, etc., and has launched many excellent equipment products such as UltraECP-map. It is estimated that at present, Shengmei products can cover a total of about 5 billion US dollars in the market including cleaning, copper plating, furnace tubes, etc., and the company will continue to develop two new front-end equipment to increase the product coverage market from the existing 5 billion US dollars to 10 billion US dollars, while the company's revenue in 2020 is only 1.007 billion yuan, which has considerable room for improvement. According to the international bidding network, the proportion of the company's cleaning equipment winning bids in the Yangtze River Storage, Huali and Huahong Wuxi production lines showed an upward trend year by year.

The go-to-market strategy was successful and the customer globalization strategy was implemented. Since October 2021, the company has successively obtained orders from international first-line customers, including DEMOs orders for SAPS equipment from a major global semiconductor manufacturer, which is expected to be assembled in the first quarter of 2022 in China; Ultra-ECPmap COPPER PLAting equipment DEMO order from a major Asian semiconductor manufacturer, expected to be delivered in early 2022; Received two orders for UltraCpr wet degumming equipment from a leading global IDM chip manufacturer. The success of the company's overseas market promotion strategy lies in the fact that the original differentiated technology is first verified in a number of key Asian clients, and then promoted to the world's leading manufacturers.

The company actually raised 3.69 billion yuan in this public offering of new shares, and the funds raised were used for the R&D and manufacturing center of Shengmei Shanghai equipment and the R&D project of Shengmei Shanghai high-end semiconductor equipment, and quickly realized the integrated development and production of related process equipment such as tank cleaning equipment and vertical furnace tube equipment (annealing furnace, oxidation furnace, LPCVD, ALD), and expanded and established a complete range of product lines for wet and dry equipment.

Huatai Securities said that Shengmei Shanghai is the leader of domestic semiconductor cleaning equipment, optimistic about the company's "platform, differentiation, globalization" core competitiveness, predicting that the revenue of 2021-2023 will be 1.560 billion yuan, 2.739 billion yuan, 3.987 billion yuan, the first coverage to give a "buy" rating, considering the company's leading position, with the industry Wind consensus expected average of 20.8 times, 2022PS based on a valuation premium of 21.6%, corresponding to the target price of 160 yuan / share. Reporter Liu Xiwei