\u3000\u3 Guocheng Mining Co.Ltd(000688) 012 Advanced Micro-Fabrication Equipment Inc.China(688012) )
Ping An View:
The company is a double leader of domestic etching equipment and MOCVD equipment Advanced Micro-Fabrication Equipment Inc.China(688012) was founded in 2004 and landed on the science and innovation board in July 2019. The core products of the company are etching equipment (key equipment for integrated circuit manufacturing) and MOCVD equipment (key equipment for LED / miniled epitaxy), which enjoy global competitiveness. In 2021, the company’s performance express disclosed that the revenue was 3.108 billion yuan (+ 36.7%), of which the revenue of etching equipment and MOCVD equipment were 2.004 billion yuan and 503 million yuan respectively, accounting for 64.5% and 16.2% respectively. In 2021, the company’s net profit attributable to the parent company and deducting non net profit were RMB 1.011 billion (+ 105.5%) and RMB 322 million (+ 1281.9%) respectively. In the past four years, the company’s revenue and net profit attributable to parent company CAGR reached 33.7% and 140.9% respectively, and the performance maintained rapid growth.
As the leader of domestic substitution of etching equipment, ICP followed CCP into the outbreak period. Etching equipment is the key equipment for semiconductor manufacturing, with broad market space and concentrated pattern: in 2021, the global etching equipment market was US $18.9 billion, and Fanlin / Tel / Amat accounted for 9%. In 2021, the company’s etching equipment revenue was 2 billion yuan, accounting for about 1.7% of the global market, with sufficient growth space.
The company has technical and service advantages, and its products have entered the explosion period of domestic substitution: the etching equipment needs to go through a long verification process to enter the customer production line. The company has been deeply cultivated for many years, has solid technology and leading service, and has entered the 65-5nm production line of front-line customers at home and abroad such as TSMC. With the accelerated expansion of China’s wafer factories, the company’s etching equipment has entered the explosion period of domestic substitution, and its performance has continued to grow at a high rate (CAGR was 33.6% from 2016 to 2021).
The accumulation of CCP equipment is deep, and ICP opens the second growth curve: the proportion of CCP and ICP in etching equipment is about 4:6. The company’s CCP equipment has a profound accumulation, laying a leading position in China. After its release in 2018, ICP equipment was quickly recognized by customers with full orders, which has become a strong driving force for performance growth.
Miniled promotes the explosion of MOCVD equipment orders, and the compound semiconductor market is expected to create another brilliance. The company’s MOCVD equipment has successfully completed the domestic replacement in the era of blue LED and become a global leader. In 2021, the company seized the miniled market opportunity and took the lead in releasing miniled special MOCVD equipment. With the advantages of efficiency and yield, the company quickly seized the market share, and the company’s MOCVD equipment ushered in the stage of double improvement of revenue and gross profit margin. Looking forward to the future, the company is expected to find new growth points in the market of microled equipment and compound semiconductor MOCVD equipment.
Investment suggestion: it is estimated that from 2021 to 2023, the net profit attributable to the parent company will be RMB 1.011/11.27/1.404 billion respectively, and the corresponding PE will be 74 / 66 / 53 times respectively. As the double leader of etching equipment and MOCVD, the company has strong growth potential. We cover it for the first time and give it a “recommended” rating.
Risk tips: (1) the risk that downstream customers’ investment in expanding production is less than expected. If the subsequent investment of downstream Fabs and LED chip manufacturers is less than expected, the purchase demand for relevant equipment will be weakened, which will affect the order volume of the company, and then adversely affect the performance of the company. (2) New product development is less than expected risk. If the company’s new product development is less than expected, it will affect the long-term development of the company. (3) International trade friction risk. In recent years, international trade frictions have continued. If the Sino US trade friction continues to deteriorate, the company’s production and operation will be affected to some extent. (4) Risk of changes in government subsidies. If the company cannot continue to receive government subsidies in the future or the government subsidies are significantly reduced, it will have an adverse impact on the company’s operating performance.
