Incidents:
On March 31, the company released its 2022 annual report. It achieved annual revenue of 1,227 billion yuan, an increase of 6.72% over the previous year; achieved net profit of 123 million yuan, an increase of 13.70% over the previous year; and achieved net profit of 113 million yuan after deducting non-return mother's net profit of 113 million yuan, an increase of 6.99% over the previous year.
The improvement in annual performance was in line with expectations, and profit margins increased year-on-year:
According to the annual report announcement, the company's Q4 quarterly revenue was 389 million yuan, YoY +1.30%, QoQ +43.05%; the net profit of the mother was 38 million, YoY -15.86%, and QoQ +64.71%. The company's performance grew steadily in '22, mainly due to the increase in sales scale in the expansion market, the increase in downstream demand, and the net profit growth rate was higher than the revenue growth rate. The gross margin in 2022 was 27.82%, +0.91pct; the net interest rate was 10.10%, +0.74pct. The gross margin rose sharply, and profitability improved. The company's sales expenses, management expenses, and R&D expenses changed -13.53%/+38.07%/+10.30%, respectively. Mainly due to the company's adjustment of transportation models, sales expenses reduced intermediary warehouse transfer costs and the decline in warranty funds; management expenses added office usage rights assets and office rent and property expenses; R&D expenses were the result of R&D expenses settlement and testing fees. Cash flow from operating activities YoY 193.03% is mainly due to an increase in on-hand orders and an increase in inventory reserves. Performance is expected to continue to grow in 2023 as the impact of the pandemic is removed and additional production capacity is released.
The main business focuses on ultra-clean semiconductor plants and continues to strengthen the advantages of “diversification, globalization and sustainability”:
The company's main business is a leader in the localization of semiconductor cleaning equipment and consumables. According to the annual report, the company's business accounts for 30% of the domestic semiconductor cleanroom market, while continuing to expand in downstream fields such as GMP biopharmaceuticals, photovoltaics, and new energy. On the overseas side, the company's ultra-high efficiency filter products are in an advantageous position compared to overseas leaders, speeding up the deployment of overseas markets such as Southeast Asia and entering the supply chain of core international customers such as downstream semiconductors and photovoltaics. According to the annual report, the company's overseas revenue in 19-22 was 39 million yuan, 81 million yuan, 179 million yuan and 130 million yuan respectively. The gross margin of overseas business in '22 was 30.34%, which is higher than the gross profit margin of domestic business of 27.52%.
According to the investor communication announcement of January-January '23, overseas orders currently account for about 15-20%. As the company lays out overseas production bases and increases sales scale, the scale of overseas business is expected to increase further, providing strong support for the company's performance growth. Filter products are consumables. The replacement cycle ranges from 6 months to 2 years. The stock replacement business has a large market space, and the customer stickiness is strong and the performance contribution is highly sustainable. As of 202H1, the company's filter products and air purification equipment categories account for 29.1% of revenue, and the share is expected to increase year by year, providing strong support for performance stability and sustainability.
Fundraising projects are awaiting commencement of production, and capacity expansion will boost future revenue:
As of 2021, the company's fan filter unit production capacity was 253,500 units, and the total production capacity of filter products was 2.249,000 pieces. The capacity utilization rate was above 100%. It is already at full capacity, and production needs to be outsourced to a certain extent. In order to solve the bottleneck of insufficient production capacity, according to the prospectus, the company's core fund-raising project is the Nanjing production plant phase II capacity expansion project. After production is put into operation, 240,000 fan filter units and 1.92 million filter products will be added respectively, bringing about a significant increase in production capacity. According to the company's investor exchange announcement, the second phase of the production expansion project began in July 2022, and is expected to be put into operation in the second half of 2023. Production capacity is expected to reach 1.5 times that of the current Nanjing plant after full delivery.
Investment advice:
We expect the company's revenue from 2023 to 2025 to be 1,625 million yuan, 2,206 million yuan, and 2,462 million yuan respectively, and net profit of 178 million yuan, 257 million yuan, and 271 million yuan respectively. Maintaining the Buy-A investment rating, the target price for 6 months is 52.00 yuan.
Risk warning:
The risk of increased competition in the industry; the risk of fluctuations in raw material prices; the risk that downstream demand falls short of expectations; the risk that accounts receivable turnover and inventory turnover are low; and the risk that the construction progress of fund-raising projects falls short of expectations.