Great Wall Guorui Securities: Give a buy rating to pure technology

2022-05-05 Great Wall Guorui Securities Co., Ltd. Huang Wenzhong, Zhang Weina conducted research on Zhichun Technology and released a research report "Benefiting from the high prosperity of the industry + domestic substitution, high growth in revenue and orders", this report gives a buy rating to Zhichun Technology, and the current stock price is 30.79 yuan.

Pure Technology(603690)

Event: The company released its 2021 annual report, and in 2021, the company achieved revenue of 2.084 billion yuan (+49.18% yoy); net profit attributable to the mother of 282 million yuan (+8.12% yoy); and net profit attributable to the mother of 162 million yuan (+46.57% yoy) after deducting non-deductions.

The company released the first quarter report of 2022, and the company achieved revenue of 548 million yuan (+136.98% yoy) in 2022Q1, net profit attributable to the mother of 0.22 billion yuan (-70.78% yoy), and net profit attributable to the mother of 0.39 billion yuan (1130.87% yoy) after deduction of non-deduction.

Event Reviews:

The pan-semiconductor segment business will drive high revenue growth in 2021 and 2022Q1. In 2021, the company achieved operating income of 2.084 billion yuan, mainly due to the revenue contribution of the growth of the company's pan-semiconductor business, including semiconductor process equipment business, process support equipment business and high-purity process system service business. Among them, the operating income of high-purity process integrated system is 1.078 billion yuan (+24.86% yoy; revenue accounts for 51.72%); the operating income of semiconductor equipment is 701 million yuan (+222.06% yoy; revenue is 33.64%); and the operating income of optical sensing and optical devices is 303 million yuan (-3.72% yoy; revenue accounts for 14.54%). In 2022Q1, the company achieved revenue of 548 million yuan and net profit attributable to the mother of 0.22 billion yuan, down 70.78% year-on-year, mainly due to the receipt of government subsidies of 68.646 million yuan in 2021Q1, the income in the reporting period was only 645,600 yuan, and the net profit attributable to the mother after deduction was 0.39 billion yuan, an increase of 1130.87% year-on-year.

Semiconductor equipment began to exert force, and the industry maintained a high degree of prosperity. 1) The semiconductor equipment business sector began to exert its strength, continued to get duplicate orders at the existing user end, and continued to develop new users. The company began to lay out the research and development of wet equipment in 2015, and began to get orders of 100 million yuan in 2018, more than 200 million yuan in 2019, and more than 500 million yuan in 2020. In 2021, the company got duplicate orders from 13 users, during which 10 new users were developed, all of which are major wafer manufacturing enterprises in the industry, and the annual orders for wet equipment reached 1.120 billion yuan, an increase of 111.32% year-on-year. In 2021, the company's monolithic wet equipment and trough wet equipment produced more than 97 units throughout the year. At the same time, the new order amount of 12-inch wet equipment exceeded 600 million yuan, of which the new order amount of single-chip wet equipment exceeded 380 million yuan. The company's wet equipment has obtained equipment orders for the entire line in several mature process production lines, effectively replacing the previous two Japanese manufacturers; the company has also obtained wet equipment orders for the entire line on the gallium nitride and silicon carbide production lines; the company has obtained equipment orders for all processes at the 28-nanometer node of the advanced process; and has also received orders for 4 wet equipment in the process below 14 nanometers. 2) According to ICInsights data, global semiconductor industry capital expenditures are expected to hit a record high of $190.4 billion in 2022, up 24% year-on-year. According to Gartner statistics, the global semiconductor cleaning equipment market size in 2020 is 2.539 billion US dollars, and in 2021, with the recovery of the global semiconductor industry, the global semiconductor cleaning equipment market will show a growing trend year by year, and the global semiconductor cleaning equipment industry is expected to reach 3.193 billion US dollars in 2024. Relying on the industry's high prosperity and localization substitution demand, in 2022, the company's new order target is more than 4 billion yuan, of which the new order target for wet equipment is more than 2 billion yuan, and the new order is estimated to account for 60% of the single-chip equipment.

High-purity process systems continue to grow, supporting the increase in the proportion of equipment. 1) The high-purity process system business segment has maintained continuous growth, of which the domestic substitution of gas and chemical support equipment business has progressed smoothly, and the research and development of core equipment and related control software of a number of high-purity process systems has been successfully completed, and the purchase has been replaced by the use of self-made equipment and software. The company's process level has been able to achieve ppb (one part per billion) level of impurity control, becoming a recognized brand of mainstream integrated circuit manufacturing users and shipping has increased sharply. In 2021, the main customers are the industry's first-line integrated circuit manufacturing enterprises, such as SMIC, Huahong, Changxin, SilanWei, etc., and the annual order number has reached a new high. With the successful completion of the expansion plan to support equipment capacity, the company has a competitive advantage in the industry in this business segment, and will obtain more order opportunities from downstream customers in the future to maintain a stable growth trend. 2) High-purity process gas and chemical support equipment as and oxidation / diffusion, etching, ion implantation, deposition, grinding, cleaning and other process chambers are connected as a working system support equipment, is closely related to the process yield of the necessary equipment, equivalent to a factory cardiovascular system. With the development of import substitution, such equipment accounts for an increasing proportion of high-purity process systems, and the derived demand for supporting design, installation, testing and debugging services is also growing, and such services continue to exist in the whole life cycle of semiconductor manufacturing enterprises. The company has become a leading supplier of such equipment (including high-purity special gas equipment, high-purity chemical supply equipment, grinding fluid supply equipment, precursor supply equipment, process exhaust liquid treatment equipment, dry machine gas supply module, etc.) in China, and delivers more than 5,000 sets of various types of equipment every year.

The intensity of research and development has increased year by year, reaching 14.50% in 2021. Since 2017, the company's R&D intensity (R&D investment/operating income) has increased year by year, with 7.44%, 10.76% and 14.50% in 2019-2021, respectively. In 2021, the company's R&D investment was 302 million yuan (including 144 million yuan for expenses and 158 million yuan for capitalization), an increase of 101.06% year-on-year. The company is a domestic can provide to 28 nanometer process node all wet process of the local supplier, single-piece, trough wet equipment has been recognized by customers, the company's 12-inch single-piece wet cleaning equipment and trough wet equipment will effectively represent the local brand to participate in the Chinese mainland and Chinese mainland outside the high-end cleaning equipment market competition, in 2021, the company's first batch of monolithic wet equipment delivered and multi-process successfully verified. At the same time, the proposed convertible corporate bond plan was issued, and the total amount of convertible bonds to be issued will not exceed RMB1.1 billion for the single-chip wet process module, the core component research and development project, the pure northern semiconductor R&D and production center project, the semiconductor equipment module and component manufacturing project, etc. At present, the plan is being actively promoted to provide financial support for the rapid development of the company's business and the realization of its business strategy. Through active R&D investment and business layout, we ensure the company's long-term competitiveness and flexible and controllable supply.

Investment Advice:

We expect the company's net profit for 2022-2024 to be 3.99/5.08/607 million yuan, EPS 1.25/1.59/1.91 yuan per share, and the current stock price corresponding to P/E is 25/20/16 times, respectively. Considering that the pan-semiconductor industry in which the company is located is in a high boom cycle, the superimposed domestic process equipment is in the golden window period of domestic substitution, the company's equipment research and development continues to make technological breakthroughs, and the order growth is high, we have upgraded its "overweight" rating to "buy".

Risk Warning:

Risk of intensified competition in the industry; risk of accounts receivable accrual; risk of slowdown in downstream demand.

According to the research report data released by Securities Star Data Center in the past three years, the team of GF Securities Daichuan researchers has studied the stock more deeply, and the average forecast accuracy in the past three years is as high as 89.95%, and its forecast for the net profit attributable to 2022 is 452 million yuan, and the forecast PE converted according to the current price is 21.68.

The latest profit forecast breakdown is as follows:

A total of 8 institutions have given ratings, 7 buy ratings and 1 overweight rating in the last 90 days; the average target price of institutions in the past 90 days has been 45.72. The Securities Star Valuation Analysis Tool shows that To Pure Technology (603690) has a good company rating of 3 stars, a good price rating of 2 stars, and a valuation comprehensive rating of 2.5 stars. (Rating Range: 1 ~ 5 stars, maximum 5 stars)

The above content is compiled by Securities Star based on public information, if you have any questions, please contact us.