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New Stock Subscription Analysis for August 5, 2024

Kema Tek (301611):

Company Overview: 

The full name of the company is “Suzhou Kema Tek,Lnc.” Its primary business includes the research and development, manufacturing, sales, and services of advanced ceramic material components, as well as surface treatment services for general semiconductor equipment.

The company currently possesses a foundational advanced ceramic material system composed of six major materials: alumina, zirconia, aluminum nitride, silicon carbide, yttrium oxide, and titanium oxide. The key materials meet international mainstream customer standards for corrosion resistance, electrical insulation, high thermal conductivity, and strong mechanical properties. The company is also a leading domestic provider of advanced ceramic components for semiconductor equipment.

The company’s advanced ceramics are primarily applied in wafer manufacturing front-end process equipment. These ceramics are now used in etching, thin film deposition, ion implantation, photolithography, and oxidation diffusion equipment.

Ceramic components are one of the types of parts in semiconductor manufacturing that are closest to the wafer. During the reporting period, the majority of the company’s advanced ceramic components for semiconductor equipment were placed inside chambers, with some parts in direct contact with the wafer. Semiconductor ceramic components include types such as rings, cylinders, load-bearing components, hand claws, and modules.

The company has entered the supply chain of globally renowned semiconductor equipment manufacturers such as Company A, and has established stable, in-depth cooperation with domestic semiconductor equipment leaders such as North Huachuang, Naura Technology, and Tuojing Technology. The company is currently one of the few advanced structural ceramic suppliers for Company A in China and has been a global gold supplier for North Huachuang for three consecutive years.

The company’s advanced ceramic products are also mass-applied in other general semiconductor equipment fields, including display panels, LEDs, photovoltaics

a. Advanced Ceramics

The foundation of the company’s advanced ceramics business is its materials, and the product form is highly customized components, ultimately applied in key industries of the national economy, such as semiconductors and new energy.

The company has mastered the full process technology of advanced ceramics, from material formulation to component manufacturing. As of the date of signing this prospectus, the company has mass-produced six types of advanced ceramic materials and is researching two new materials. Since 2019, the company has designed and developed over 13,000 customized components.

The application areas of the company's advanced ceramic material components mainly include the following:Semiconductor production equipment components，Display panel production equipment components，LED and photovoltaic production equipment components，Electronics (including lithium battery) material powder crushing and classification equipment components，Automobile manufacturing equipment components，Textile equipment components，Biopharmaceutical equipment components.

The application of semiconductor production equipment parts is shown as follows:

b. Surface Treatment Services

The company's surface treatment operations are not only an essential post-processing step in the manufacturing of advanced ceramic material components but also provide professional third-party surface treatment services.

As part of the advanced ceramic material component manufacturing process, the company utilizes precision cleaning to strictly control surface contaminants, such as particulate matter and metal ions. Additionally, methods such as sandblasting and thermal spraying are used to form specific surface coatings and morphologies.

In terms of external surface treatment services, the company focuses on the display panel industry, offering precision cleaning, anodizing, and thermal spraying services for LCD and OLED manufacturing equipment. The details are as follows:

c. Metal structural parts

The company's metal structural parts products are used in display panel production equipment, including upper electrodes, wall panels, etc. This type of product uses a variety of technologies and manufacturing methods such as precision machining, anodizing and spraying. The specific situation is as follows:

The business is mainly ceramic materials, and because it is a basic raw material, it can be used in semiconductor equipment, display panels, photovoltaics, and automobile manufacturing industries. Since ceramic materials have high requirements for technology, their surface treatment technology is also used to form business sales. In addition, there are some metal structural parts sales, which belong to the concept of localization of high-precision basic materials.

In terms of specific revenue, the main revenue comes from advanced ceramic material components, accounting for 80% of the revenue, of which the pan-semiconductor field accounts for more than 60%.

The corresponding industry is computer, communication and other electronic equipment manufacturing industry, and the comparable listed companies are Zhongci Electronics (003031), Fuchuang Precision (688409), and Fuled (301297).

Issuance:

Issued on the Growth Enterprise Market, underwritten by CITIC Securities, with a new issuance market value of 600 million yuan, a total market value of 3.488 billion yuan after issuance, an issuance price of 8.0 yuan, an issuance price-earnings ratio of 44.90, a PE-TTM of 38.07x, and a maximum subscription requires a market value of 120,000 yuan.

Compared with the computer, communication and other electronic equipment manufacturing industry, the PE-TTM is 32.63x, the PE-TTM of Zhongci Electronics is 39.48x, the PE-TTM of Fuchuang Precision is 62.15x, and the PE-TTM of Fuled is 72.87x.

Performance:

The operating income range that can be achieved in the first half of 2024 is 365 million to 392 million yuan, with a year-on-year change of 55.93% to 67.46%;

The net profit attributable to the parent company's owners after deducting non-recurring gains and losses is 117.6575 million to 140.8838 million yuan, with a year-on-year change of 249.86% to 318.92%.

The operating income in 2023 is 480.4496 million yuan, the revenue in 2022 is 462.4694 million yuan, and the revenue in 2021 is 345.0158 million yuan, with an annual compound growth rate of 18.01%.

The net profit attributable to the parent company after deducting non-recurring items in 2023 is 77.6888 million yuan, the net profit attributable to the parent company after deducting non-recurring items in 2022 is 86.2036 million yuan, and the net profit attributable to the parent company after deducting non-recurring items in 2021 is 67.0885 million yuan, with an annual compound growth rate of 7.61%.

The revenue growth rate from 2021 to 2023 is good, the profit is a bit weak and it is declining in 2023, and then in the first half of this year, both revenue and profit have increased significantly, especially the profit has directly exploded.

According to the explanation in the prospectus, mainly due to the recovery of global semiconductor capital expenditure and the increase in downstream demand, the company's independently developed and produced semiconductor equipment core component ceramic heater has strong downstream demand, and at the same time, the company's semiconductor equipment core component ceramic heater has achieved domestic substitution. This type of module product solves the "neck" problem of key components of CVD equipment of downstream wafer manufacturers and generates higher returns.

In terms of specific gross profit margin, the gross profit margin of the main business from 2021 to 2023 was 43.02%, 42.18% and 39.67% respectively, and the gross profit margin has declined year by year.

According to the explanation in the prospectus, the main reasons are the increase in demand from domestic customers with lower gross profit margins, the impact of fluctuations in upstream raw material prices, and industry competition.

Compared with peers, it is at the top level.

Note: during the report period, the company's surface treatment services are used in the field of display panel equipment. in addition to engaging in display panel equipment cleaning services, the company's surface treatment services are also engaged in semiconductor equipment cleaning services and semiconductor equipment maintenance services, therefore, this is a selection of its display panel equipment cleaning service gross rate compared with the company analysis.

The industry concept is promising, with past performance being fairly good and excellent prospects for this year. The gross margin is also satisfactory. The key focus is the global recovery in semiconductor demand, while domestic semiconductor ETFs are still struggling.

Regarding the issuance, it is listed on the ChiNext board, with a relatively low issuance price. The issuance P/E ratio is slightly high, but the P/E-TTM is reasonable.