\u3000\u3000 Advanced Micro-Fabrication Equipment Inc.China(688012) (688012)
Performance announcement
China micro semiconductor announced its performance forecast for 2021 on January 22 and 2022. It is expected that the revenue in 2021 will be 3.108 billion yuan, with a year-on-year increase of 36.7%, which is in line with market expectations. The company expects the net profit attributable to the parent company to be 950-1.03 billion yuan in 2021, with a year-on-year increase of 93-109%, which is much higher than the market expectation of 652 million yuan. We attribute it to the increase of gross profit margin by nearly five points (2020’s 38%, 2021’s 43%), and the income from changes in fair value (equity investment of non listed companies) and government subsidies of 370 million yuan are higher than expected. The company expects the net profit deducted from non-profit in 2021 to be RMB 280-330 million, with a year-on-year increase of 1101-1315%.
Brief comment
The short-term revenue momentum is still strong: in the third quarter of last year, the revenue growth was flat. The company announced that the revenue in the fourth quarter reached 1.04 billion, with a month on month growth of 41% and a year-on-year growth of 30%, mainly due to the significant month on month / year growth of MOCVD equipment of 138% / 109%, and the company’s gross profit margin in the fourth quarter remained at 43-44% in the third quarter. According to seasonal factors, we expect the decline of revenue in the first quarter to be expected, but it should be better than the 24% decline in the first quarter of last year. This is due to TSMC’s substantial increase in capital expenditure, domestic substitution in full swing, and memory prices better than market expectations.
In terms of business, in 2021, the revenue of etching machine increased by 55%, MOCVD increased by 1.5% and new orders increased by 91%. (1) In 2021, the company’s etching equipment revenue was 2 billion yuan, an increase of about 55.44% over 2020, and the gross profit margin reached 44.4%; (2) Due to the downstream market and the unrecognized revenue of the newly signed Mini ledmocvd equipment scale orders this year, the revenue of MOCVD equipment in 2021 was 500 million yuan, an increase of about 1.5% over 2020, but the gross profit margin of MOCVD equipment reached 33.1%, a significant increase from 18.7% in 2020. The amount of new orders signed by the company in 2021 was 4.13 billion yuan, an increase of about 1.96 billion yuan over 2020, a year-on-year increase of about 90.5%.
Profit forecast and investment suggestions
Due to the substantial increase in capital expenditure of TSMC, the domestic substitution is in full swing, the memory price is better than the market expectation, and the MOCVD market recovers. We predict that the parent company’s return profit of the company in 2021-23 will reach 25% / 18% / 16%, from RMB 768 / 873 / 1337 million to RMB 960 / 10.3 / 1550 million. With reference to the historical valuation of the company, the target price is 213 yuan according to 90 times PE and 3xpeg in 2023, maintaining the “buy” rating.
Risk tips
The risk of slow growth of capital expenditure of key customers, the risk of backward technology, the risk of falling demand and price of MOCVD equipment, and the risk of loss of core management team and key technical personnel.
