AI mobile phone, recovery is clear!
Apple, the global leader in consumer electronics, launched Apple Intelligence on June 11, which will provide a series of AI features for iPhones and other devices in the future.
In related industries, Lixun Precision, Pengding Holdings, GigaDevice Innovation, Changdian Technology, Jingfang Technology, Industrial Fulian, Goertek, Shennan Circuit, Dongshan Precision, Saiteng and other enterprises are hot.
The most important thing for the popularization of AI is chip upgrades. At present, the mainland has made great breakthroughs in the field of upstream raw materials and equipment for chips. Global semiconductor equipment sales are expected to reach $124.1 billion in 2025.
With the continuous popularization of automation technology, most semiconductor equipment in mainland China is gradually automated. The market scale of automation equipment continues to expand, and the performance of companies such as Saiteng Co., Ltd., Baichu Electronics, and Oak Technology has shown certain growth in 2024.
ROE is a core indicator to measure the profitability of a company.
Among the 93 automation equipment companies in the mainland, Saiteng Co., Ltd.'s ROE in 2023 will reach 35.28%, ranking first.
Saiteng shares are the core beneficiary target of the Apple chain, with the Apple chain business accounting for 70% (indirectly serving Apple through Samsung/Hynix), with stable growth in performance, substantial improvement in profitability, and strong certainty of future development.
The ROE of Saiteng shares increased from 13.89% in 2021 to 35.38% in 2023, which is higher than the 34.19% of Kweichow Moutai in the same period, which is extremely rare in the entire Apple chain.
So, why is the return on equity of Saiteng shares so high?
According to DuPont analysis, ROE = net profit margin * total asset turnover ratio * equity multiplier
From the chart, we can see that the change trend of net profit margin and total asset turnover ratio of Saiteng shares is consistent with ROE.
Saiteng shares with the deep binding of large customers to bring stronger collection ability, the total asset turnover rate continues to increase, but in 2023 it will only be 0.94, the company's investment and profitability are actually very weak, which is also related to the company's continuous acquisition and new production capacity in the past few years, and more investment in expansion.
The expansion of Saiteng's assets is mainly due to the advanced layout of the semiconductor field.
Semiconductors are receiving more and more attention, and some investors will bypass companies related to chip design, R&D, and production, and instead look for companies with alternative concepts, such as equipment-related companies that belong to shovel stocks in the semiconductor industry.
With the advancement and development of technology, in order to ensure the final yield rate, the manufacturing process requires close to "zero defects", and the detection and measurement link is a very critical link to ensure the yield rate of chip production.
From 2018 to 2019, the company acquired Japan's OPTIMA and increased the layout of semiconductor testing equipment. Optima has been deeply involved in the semiconductor inspection and measurement equipment industry for many years, with strong technical strength, and its main products are in the leading position in the world.
In 2023, the semiconductor business of Saiteng Co., Ltd. will achieve revenue of 264 million yuan, and the gross profit margin will also increase from 44.86% in the same period last year to 47.29%. At present, Saiteng has added 6 orders for HBM testing equipment, and there are 37 existing orders, which will contribute new increments to the performance.
Semiconductor testing equipment not only plays a vital role in the entire production chain, but also has a broad space for development in the future.
On the one hand, the market size is constantly expanding
In the future, with the increasing process and process links, the demand for testing equipment and measurement equipment will double.
In 2022, the market space of semiconductor testing and measurement in mainland China will reach 38.56 billion yuan, and it is expected to continue to grow at a compound growth rate of 15.4% in the future, with a huge market space.
On the other hand, there is a lot of room for domestic substitution
At present, the global semiconductor testing and measurement equipment market presents a monopoly pattern of foreign equipment companies, and the localization rate of the domestic market is low, and foreign companies occupy a dominant position.
In 2020, the total market share of the top five domestic companies exceeded 78%, all of which came from the United States and Japan, and there is a large space for domestic substitution.
In recent years, on the one hand, Saiteng has mastered foreign core technologies through acquisitions, and on the other hand, in April 2023, Saiteng has invested 2.5 billion yuan to establish high-end semiconductor and other production base projects to continue to expand the company's territory in the field of semiconductor equipment.
Due to continuous acquisitions and expansions, the asset turnover capacity of Saiteng shares is weak, and the effect on ROE is small. Therefore, the improvement of the company's ROE mainly depends on the continuous improvement of net profit margin.
In 2023, the net profit margin of Saiteng shares will be 15.59%, an increase of 7.35 percentage points from 2021, and the profitability will continue to improve, and the company has sufficient room for performance growth.
The net profit margin of sales is affected by the gross profit margin and the period expense ratio.
First, the gross profit margin continues to rise.
Since 2020, with the gradual increase in the semiconductor business, the gross profit margin of Saiteng shares has continued to increase. The gross profit margin of Saiteng shares increased from 39.12% in 2021 to 46.92% in 2023, driving the company's net profit margin to rise.
In the first quarter of 2024, the gross profit margin of Saiteng shares dropped slightly to 45.56%, but it was still in a high position, much higher than that of Inovance Technology, Zhongchen Technology, and Oak Technology in the same industry.
Second, the cost rate has been continuously reduced during the period.
The increase in the net profit margin of Saiteng shares is not only through the improvement of gross profit margin, but also the company's period expenses are constantly decreasing. In 2020, the expense ratio of Saiteng shares during the period was 31.26%, and in 2023, it decreased by 4.66 percentage points to only 26.5%.
In terms of breakdown, the financial expense ratio of Saiteng shares has decreased most significantly, from 2.37% in 2020 to -0.16% in 2023, so that the overall expense ratio during the period will decrease.
Reasons for the negative financial expenses of Saiteng shares:
On the one hand, with the gradual improvement of the company's layout, there is no need to pay a large amount of interest expenses for the financing of the previous expansion.
On the other hand, it is also related to the relatively high proportion of the company's overseas business, and has achieved certain foreign exchange gains. In 2023, the export business of Saiteng Co., Ltd. will achieve revenue of 2.436 billion yuan, accounting for 54.8% of the total revenue.
To sum up, the ROE of Saiteng shares has doubled in two years, and due to the company's expansion, the total asset turnover rate is weak, and the company's ROE is mainly driven by the increase in net profit margin.
The company has super profitability, what is the future development space?
In addition to the continuous layout in the field of semiconductor testing equipment mentioned above, the main increment in the development of Saiteng's performance is in its main business consumer electronics.
As the interface of the "metaverse", wearables in the XR industry are widely considered to be the direction that has the potential to become the next flashpoint for consumer electronics.
The XR industry includes VR (Virtual Reality), AR (Augmented Reality), MR (Mixed Reality), etc.
In 2022, global VR shipments will be 9.86 million units, and it is expected to reach 45 million units by 2027, with a compound annual growth rate of 35%; Global AR is expected to increase to 10 million units by 2027, with a compound annual growth rate of 89%, and there is still great room for incremental growth in the future.
With its technical advantages, Saiteng shares have formed a deep binding with Apple, so the key is to see Apple's breakthrough in the XR field.
Apple has released the Apple Vision Pro in June 2023 and successfully entered the VR/AR market, and with the continuous advancement of technology, the company will continue to benefit from the increase in orders.
Finally, let's take a look at the company's performance
Thanks to the high prosperity of the downstream industry and close cooperation with major customers, the revenue and profit of Saiteng Co., Ltd. have maintained ultra-high growth for many years.
In 2023, Saiteng will achieve revenue of 4.446 billion yuan, with a compound annual growth rate of 33.57% from 2018 to 2023; The net profit was 687 million yuan, with a compound annual growth rate of 30.41% from 2018 to 2023.
In the first quarter of 2024, Saiteng Co., Ltd. continued to maintain a growth trend, achieving operating income of 774 million yuan, a year-on-year increase of 8.26%; The net profit attributable to the parent company was 94 million yuan, a year-on-year increase of 30.08%.
In general, Saiteng shares have stable growth performance and super profitability, has long-term development of capital, coupled with the company's layout is in the field of semiconductors and consumer electronics with broad development space, the future is expected to achieve performance and valuation of Davis double.
The above analysis does not constitute specific trading advice, the stock market is risky, and investment should be cautious.
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Source: Flying Whale Investment Research