NAURA TECHNOLOGY(002371)：PREANNOUNCED 2021 RESULTS SLIGHTLY BEAT MARKET EXPECTATIONS ON ROBUST DEMAND FOR SEMICONDUCTOR EQUIPMENT-格隆汇

机构：中金公司
研究员：Xuelai LI/Jiongyi HU/Hu PENG

Preannounced 2021 earnings up 75-125% YoY
NAURA Technology has preannounced its 2021 results: Revenue grew 40-80% YoY to Rmb8.48-10.9bn, in line with our and the market's expectations; net profit attributable to shareholders rose 75-125% YoY to Rmb0.94-1.21bn, in line with our expectations but exceeding market expectations; and recurring net profit surged 250-350% YoY to Rmb690-887mn. The firm’s semiconductor equipment and electronic components businesses recorded continued growth in 2021 thanks to robust downstream demand.
Trends to watch
Semiconductor equipment and electronic components businesses maintained steady growth driven by strong downstream demand. The firm accelerated its rollout of new integrated circuit (IC) related products such as etching equipment, physical vapor deposition (PVD), chemical vapor deposition (CVD), vertical furnaces, and cleaning tools. It also added third-generation semiconductors, new displays, and photovoltaic manufacturing equipment to its semiconductor product portfolio. In addition, the firm benefited from growing downstream demand for electronics components.
NAURA announced it made provisions for asset impairment losses in 2021. The firm recognized impairment losses of Rmb88mn in 2021, including credit impairment losses of Rmb31mn and asset impairment losses of Rmb57mn (impairment loss on fixed assets reached Rmb48mn). We note that the firm mainly booked one-off impairment provisions on its photovoltaic (PV) and lithium battery equipment production lines instead of its core IC equipment production lines, which will not hurt the firm’s growth in the long term.
We note that the localization of front-end semiconductor equipment has accelerated since 2021, which has been reflected in NAURA’s 1-3Q21 earnings and preannounced 2021 earnings. SEMI expects the size of the global front-end semiconductor equipment market to reach US$88bn and US$98.9bn in 2021 and 2022. According to ICwise, the ratio of domestic equipment procured by fabs on the Chinese mainland was 7% in 2020, implying large upside. We believe that NAURA, as a leading domestic semiconductor equipment platform, will enjoy strong earnings growth in the long term.
Valuation and recommendation
We leave our previous earnings forecasts unchanged and introduce our 2023 forecast. We estimate that the firm’s revenue will rise 56.3% YoY to Rmb9.47bn in 2021, 42.4% YoY to Rmb13.48bn in 2022, and 33.2% YoY to Rmb17.96bn in 2023. We expect the firm’s net profit to increase 102.1% YoY to Rmb1.09bn in 2021, 40.3% YoY to Rmb1.52bn in 2022, and 34.3% YoY to Rmb2.05bn in 2023. The stock is trading at 11.3x 2022e P/S. Given a clear trend of import substitution in the semiconductor equipment industry and high visibility of the firm’s earnings growth ahead, we adopt the forward P/S valuation method. We keep our 2025 revenue forecast unchanged at Rmb29.35bn. We maintain OUTPERFORM and our TP of Rmb424.54 , offering 47% upside.
Risks
Disappointing capacity expansion of downstream fabs or adoption of domestic semiconductor equipment.