CIRCUIT FABOLOGY MICROELECTRONICS EQUIPMENT(688630)：PRIVATE PLACEMENT TO EXPEDITE DI EXPANSION AND INDEPENDENT R&D OF CORE COMPONENTS

　　What's new
　　Circuit Fabology Microelectronics Equipment (CFMEE) launched its 2022 private placement plan on September 1. The firm proposed granting up to 36.24mn A-shares to raise a maximum of Rmb825mn, and it plans to use the proceeds from the private placement to fund: 1) a direct imaging (DI) equipment project to expand their industrial applications; 2) an IC substrate and substrate-like printed circuit board (PCB) industrialization project, and; 3) independent R&D into its key subsystems and core components, and to replenish its working capital.
　　CFMEE has established a competitive advantage in PCB wiring technologies, and become a supplier to multiple leading PCB manufacturers such as Tripod Technology, Shennan Circuits, Avary Holding and Kinwong Electronic. It also supplies advanced packaging products, IC substrates, PCB solder masks, Mini LED, and lead frames to companies such as Huatian Technology, and had technology discussions with downstream mainstream photovoltaic (PV) cell producers. We expect the firm to use the funds raised via the private placement to build production bases, thereby expanding the applications of its DI equipment into industries such as new displays, PCB solder masks, lead frames, PV, IC substrates, and substrate-like PCBs.
　　Comments
　　Rmb266mn of the proceeds raised via the private placement to fund the expansion of industrial applications of CFMEE’s DI equipment. CFMEE plans to build a DI equipment production base to facilitate its expansion into industries such as new displays, PCB solder masks, lead frames, and PV. The firm has expanded the production capacity of its existing NEX series products while continuing to develop and commercialize new products. CFMEE expects the new production base to contribute 210 units/yr of DI equipment once it reaches the design capacity.
　　Rmb176mn of proceeds raised via the private placement to fund an IC substrate and substrate-like PCB industrialization project. CFMEE intends to construct a production base for IC substrate and substrate-like PCB DI equipment to meet growing demand amid the rise of import substitution and increase the proportion of its high-end DI equipment series to drive profits. The firm expects the new production base to add 70 units/yr of IC substrate and substrate-like PCB DI equipment products once it runs at full capacity.
　　Rmb152mn of the proceeds raised via the private placement to fund the independent R&D of key subsystems and core components. CFMEE seeks to deepen its R&D in technologies such as high-precision motion control platforms, advanced laser light sources, semiconductor front-end modules and deep learning algorithm-based smart DI systems. We believe this has allowed the firm to remain independent in the R&D of its key subsystems and core components.
　　Financials and valuation
　　We keep our earnings forecasts largely unchanged. We expect the firm’s revenue to grow 44% YoY to Rmb706mn in 2022, and 39% YoY to Rmb984mn in 2023. We project the firm’s net profit to increase 41% YoY to Rmb150mn in 2022, and 37% YoY to Rmb205mn in 2023. The stock is trading at 42.7x 2023e P/E. We maintain OUTPERFORM and our TP at Rmb102 (60.0x 2023e P/E), offering 41% upside.
　　Risks
　　Falling equipment product prices; cyclical fluctuations in capex of the PCB and pan-semiconductor industries; slower-than-expected new equipment product verification; uncertainties in supply of core components and parts.
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   【免责声明】本文仅代表第三方观点，不代表和讯网立场。投资者据此操作，风险请自担。