Event Review

Shengmei Shanghai Releases 2023 Semi-Annual Report. In the first half of 2023, the company achieved operating income of 1.61 billion billion yuan, an increase of 46.94 percent over the same period last year; net profit attributable to shareholders of listed companies was 0.439 billion billion yuan, an increase of 85.74 percent over the same period last year; net profit attributable to shareholders of listed companies after deducting non-recurring gains and losses was 0.406 billion billion yuan, an increase of 57.88 percent over the same period last year.

cleaning equipment is still the company's main revenue contribution business, electroplating, furnace tube and other leading equipment increased by more than 100. ① According to the data of Shengmei Shanghai 23H1 performance conference, the revenue of cleaning equipment (including single chip, trough type, single chip trough type combination, etc.) was 0.986 billion yuan, accounting for 61.27 of the total revenue, up 26.08 year on year; ② Electroplating, furnace tube and other front equipment (electroplating equipment (front and back), vertical furnace tube and other technologies): revenue was 0.465 billion yuan, accounting for 28.86 of the total revenue, up 125.73 year on year; advanced packaging and other back-end equipment (advanced packaging wet equipment and other back-end equipment (excluding electroplating equipment), spare parts and services): revenue 0.159 billion, accounting for 9.87 percent of revenue, up 47.91 percent year-on-year, the series of products cover a variety of packaging equipment such as glue machines, developing machines, cleaning machines, glue remover, wet etching machines, etc.

domestic customers basic plate steady progress, SAPS megaacoustic cleaning equipment for the first time to obtain the European global semiconductor manufacturers purchase orders. Existing customers: obtaining repeated orders from major customers such as Changjiang Storage, Hua Hong Group, Hynix, SMIC, Changxin Storage, Changdian Technology, Tongfu Microelectronics, SMIC Changdian, Nepes, Jin Ruihong, Taiwan Hejing Technology, Institute of Microelectronics, Chinese Academy of Sciences, Shanghai Integrated Circuit Research and Development Center, Huajin Semiconductor, Shilan Micro, Xinen Semiconductor, Jinghe, Zhongke Zhixin, Xinde and other leading domestic silicon carbide substrate manufacturers.

in terms of new customer expansion: in February, the company won the first purchase order for 12-cavity monolithic SAPS megasonic cleaning equipment from a global European semiconductor manufacturer. In March, the company obtained the first purchase order for Ultra C SiC silicon carbide substrate cleaning equipment.

differentiation shaping industry barriers, multi-core technology reached the international advanced level. In terms of original innovation, the company's unique spatial alternating phase shift (SAPS) megasonic cleaning technology provides effective and efficient cleaning, solving the problem of shrinking the size of "fatal defects" and difficult cleaning of silicon wafers in advanced technology nodes. In terms of integrated innovation, the company UltraC Tahoe (single chip + trough type) integrates the process advantages and cost advantages of trough cleaning machine and single chip cleaning machine, reduces the use of high-temperature sulfuric acid, reduces the cost of sulfuric acid by more than 50% to 80%, greatly reduces the waste liquid treatment capacity of chip factory, reduces process steps, improves process performance and shortens the production cycle of products. The company's core technologies (SAPS megasonic cleaning technology, TEBO megasonic cleaning technology, single-wafer tank combined Tahoe high-temperature sulfuric acid cleaning technology, stress-free polishing technology, multi-anode plating technology, ECP electrochemical plating technology, Furnace vertical furnace tube technology) are mainly applied to semiconductor cleaning equipment, stress-free polishing equipment, electromechanical copper plating equipment, which are independently developed by the company. Compared with well-known equipment manufacturers at home and abroad, part of the core technology has reached the international leading or international advanced level.

Advanced packaging drives the demand for "middle-channel equipment", and the localization of equipment production lines is gradually progressing. Advanced packaging is more carried out on the wafer level, and the back-end connection circuit is made by the front-end manufacturing method. The similarity of the process flow makes the two use roughly the same equipment. Among them, flip-chip requires front-end manufacturing processes such as ball planting, electroplating, photolithography, etching, etc. 2.5D/3D packaging TSV technology requires lithography machine, glue coating eye shadow equipment, wet etching equipment, etc. According to Yole data, the global advanced packaging market is expected to be $65 billion in 2027, with chip inversion accounting for 66% (down 4ptcs from 2021),2.5D/3D accounting for 23%, or about $15 billion, with the fastest chip embedded growth rate and CAGR of 24% in 21-27. According to the CSIA Packaging Branch 2020 report, the domestic advanced packaging production line equipment localization rate or as high as 20%-50%, the overall localization rate is higher than the traditional packaging production line.

investment suggestion: our company maintains the previous forecast and expects the operating income from 2023 to 2025 to be 38.01/48.7/5.96 billion yuan respectively, with a growth rate of 32.3/28.1/22.4 respectively. The net profit attributable to the parent is 8.01/10.16/1.215 billion yuan respectively, with a growth rate of 19.9/26.7/19.6 respectively. The corresponding PE is 57.7/45.7/38.3 times respectively. The company's international leading cleaning technology, product layout, benefit from the localization of semiconductor equipment and advanced packaging development led to an increase in demand for "medium-channel equipment", maintain, increase holdings-A proposal.

Risk Warning: Downstream demand affected by the economic environment is less than expected.