NAURA(002371) 华福证券·2024-10-21 10:00Investment Rating - The report gives Northern Huachuang (002371 SZ) a "Buy" rating for the first time with a target price of 534 32 yuan [6] Core Views - Northern Huachuang is a leading domestic semiconductor equipment company benefiting from the localization trend and state-owned capital support Its key semiconductor equipment business has grown rapidly with revenue accounting for over 80% in 2023 and net profit margin increasing from 8% in 2019 to 18% in 2023 [1] - The company is expected to achieve net profits of 5 7 billion yuan 7 83 billion yuan and 10 41 billion yuan in 2024 2025 and 2026 respectively representing year-on-year growth rates of 46% 37% and 33% [4] - The semiconductor equipment industry in China is expected to grow significantly with sales projected to exceed 41 billion USD by 2025 driven by the localization trend and technological advancements [2][3] Industry Overview - The global semiconductor industry is recovering with AI demand driving growth China's semiconductor equipment sales reached 36 6 billion USD in 2023 with a five-year CAGR of 23% [2] - The localization of semiconductor equipment in China is accelerating with the domestic production rate expected to reach 50% by 2025 up from 35% in 2023 [3] - Key equipment such as etching and thin film deposition are expected to grow faster than the industry average due to advancements in semiconductor processes and 3D structure technologies [2] Company Overview - Northern Huachuang was formed in 2016 through the merger of Sevenstar Electronics and Northern Microelectronics It has since become a leading platform-based semiconductor equipment company with significant growth in revenue and profits [9][10] - The company's revenue grew from 8 54 billion yuan in 2015 to 220 8 billion yuan in 2023 with a CAGR of 50 2% during this period [9] - Northern Huachuang's product portfolio includes etching machines thin film deposition equipment and vacuum and lithium battery equipment with etching and thin film deposition equipment holding an 11% market share in China [1][9] Financial Performance - Northern Huachuang's revenue and net profit have grown significantly with revenue increasing from 4 06 billion yuan in 2019 to 22 08 billion yuan in 2023 and net profit growing from 310 million yuan to 3 9 billion yuan during the same period [22] - The company's net profit margin improved from 8 4% in 2019 to 20 8% in 2023 driven by economies of scale and reduced expense ratios [23] - Northern Huachuang's inventory and contract liabilities have increased indicating strong order backlogs and future revenue potential [25][26] Technological Advancements - Northern Huachuang has made significant progress in key technologies such as 12-inch CCP etching machines and advanced thin film deposition equipment with multiple products passing production line verification and receiving repeat orders [20] - The company's R&D intensity is higher than that of overseas competitors with a focus on capitalizing R&D expenditures to support future market applications [18][19] Market Opportunities - The semiconductor equipment market in China is expected to grow driven by the localization trend and the expansion of domestic wafer fabs [3][37] - Northern Huachuang is well-positioned to benefit from the increasing demand for etching and thin film deposition equipment due to advancements in semiconductor processes and 3D structure technologies [41][53]