In '24, equipment companies are still expected to continue to increase product coverage and speed up the pace of new product introduction. Coupled with tenders from leading domestic storage manufacturers to expand production, the bank continues to be optimistic about the investment value of semiconductor equipment companies.
The Zhitong Finance App learned that Guolian Securities released a research report saying that although the overall boom in the semiconductor industry was weak in '23, semi-equipment companies relied on continuous product expansion and downstream customers were more willing to localize, and domestic equipment companies still achieved relatively rapid growth. In 24, equipment companies are still expected to continue to increase product coverage and speed up the pace of introduction of new products. In addition, the bank continues to be optimistic about the investment value of semiconductor equipment companies. It is recommended to focus on: Beifang Huachuang (002371.SZ), Zhongwei (688012.SH), Core Source Micro (688037.SH), Tuojing Technology (688072.SH), Microguided Nano (), Shengmei Shanghai (Dubai), etc. 688147.SH 688082.SH
The main views of Guolian Securities are as follows:
Equipment companies have issued performance pre-increase announcements one after another
Recently, semiconductor equipment companies have successively issued performance forecasts or order status announcements. Among them, Beifang Huachuang, Zhongwei, Shengmei Shanghai, Zichun Technology, and Zhongke Fei Test issued announcements of pre-increases in performance or new orders, and Precision Measurement Electronics announced pre-reduction of performance. Looking at the domestic semiconductor equipment industry, the semiconductor equipment industry's revenue and new orders continued to rise high in '23, and the net profit of a few companies declined due to business in other fields.
The industry is still booming
Sales in the global semiconductor equipment market contracted briefly in 2023, and a sharp rebound is expected in '25. According to SEMI data, global semiconductor equipment sales are expected to fall 6.3% to US$10.9 billion in 2023 due to the downturn in the cycle, while the industry will resume growth in 2024 and is expected to rebound in '25, with sales increasing 18% year-on-year to US$124 billion. Over the past 23 years, large national funds have increased their investment in domestic fabs. Investments from large national funds are expected to accelerate domestic Fab construction, domestic Fab construction is expected to usher in large-scale production expansion in 24, and the equipment industry is still very prosperous.
The current valuation level is relatively low
Since 2015, the PE of the three major US semiconductor equipment companies (AMAT, LAM, and KLAC) can reach as high as 40x and as low as 8x. The average PE in the industry is 20x, and the current PE is around 25x. On the other hand, looking at the domestic equipment industry, the industry is still developing at a high growth rate, and there is still room for improvement in valuation. The year-on-year growth rates of net profit of the industry in 2023-2025 were 44%, 36%, and 32%, respectively, and the average PE was 49x, 36x, and 27x, respectively. Compared to overseas companies, the valuation of domestic semiconductor companies is slightly higher than that of leading global manufacturers, but judging from PEG in '24, the average domestic PEG for 24 years is about 1.06, which is relatively low.
Thematic investment recommendations
Although the overall boom in the semiconductor industry was weak in '23, semi-equipment companies still achieved relatively rapid growth due to the continuous expansion of categories and the strong desire of downstream customers to localize. In 24, equipment companies are still expected to continue to increase product coverage and speed up the pace of introduction of new products. In addition, the bank continues to be optimistic about the investment value of semiconductor equipment companies. It is recommended to focus on: Beifang Huachuang, Zhongwei, Xinyuan Micro, Tuojing Technology, Microconductor Nano, Shengmei Shanghai, etc.
Investment advice for the electronics industry
1) Pre-sale of Vision Pro has started. It is recommended to pay attention to MR foundry company Lixun Precision, parts company Changying Precision/Lingyi Intelligent Manufacturing/Zhaowei Electromechanical, etc., and equipment related targets such as JPPT/Shenkeda/Yitian Co., Ltd., Huaxing Yuanchuang/Rongqi Technology, etc.
2) The domestic equipment industry continues to thrive, and valuations are relatively low. It is recommended to pay attention to: North China Huachuang, China Micro, Xinyuan Micro, Tuojing Technology, Microelectronics, Shengmei Shanghai, etc.
3) The OLED penetration rate is expected to accelerate. According to Omdia, the smartphone OLED penetration rate will increase from 29% in 2018 to 48% in 2022. It is recommended to focus on OLED panel companies: Vicino.