Incident: The company released its 2022 annual report and 2023 quarterly report. It achieved revenue of 514 million yuan in 2022, an increase of 23.2%, a net profit of 154 million yuan, an increase of 68.6%, net profit of 118 million yuan after deducting net profit of 118 million yuan, an increase of 78.79%, mainly from order recovery and profit improvement for the two main industries of petroleum composite films and superhard tools. 2023Q1 achieved revenue of 134 million yuan, an increase of 6.24% over the same period, with net profit of 34 million yuan, a year-on-year decrease of 13.98%, and net profit of non-return mothers of 0.3 billion yuan, a year-on-year decrease of 7.91%.
Comment:
The petroleum composite sheet business has benefited from the improvement in overseas oil and gas extraction sentiment and continues to advance the “big customer strategy”. The revenue of the resource extraction business in 2022 was 304 million yuan, an increase of 29% over the same period. The oil service industry is highly concentrated. The top 5 companies accounted for 93% of the market in 2021, while Schlumberger and Halliburton, which ranked the top two, accounted for 34% and 23% respectively.
The company implemented a “big account strategy” in the petroleum composite film business to achieve deep cooperation with leading customers. The top five major customers contributed 26.35% of total revenue in 2022. In terms of gross margin, it was 62.4% (+1.1PCT) in 2022, and gross margin gradually recovered as the downstream boom picked up.
Superhard tools benefit from product upgrades and import substitution trends, and the increase in gross margin is expected to be contributed by an increase in the share of high-end products. The revenue of the precision machining business in 2022 was 177 million yuan, an increase of 11% over the same period, with a gross profit margin of 40.9% (+2.7PCT).
Tianxuan Semiconductor also stated that CVD-cultivated diamond production is expected to continue to expand in 2023 to increase performance. In June 2022, the company acquired 53.11% of Tianxuan Semiconductor's shares and achieved a merger. Tianxuan Semiconductor is mainly engaged in R&D, production and sales of CVD-cultured diamonds. 1H22 achieved revenue of 26,000 yuan, with a net loss of 5,818,500 yuan, mainly due to high investment in early R&D, while the revenue contribution of cultivating diamonds is still low. 2023.4.21 The company announced that Tianxuan Semiconductor will invest 700 million yuan in the “700,000 carat annual production of functional diamond industrialization project”. The company expects the gradual commissioning of CVD equipment in 2023-2025 to contribute to increased performance.
Profit forecast and investment rating: We expect the company's 2023-2025 EPS to be 0.39/0.54/0.62 yuan respectively, corresponding to PE 25/19/16 times.
Risk factors: CVD technology research and development and equipment production expansion fell short of expectations, the price of cultivated diamonds fell, crude oil prices fell, and exchange rate fluctuations.