Event: On April 26, 2023, the company released the 2022 annual report and the first quarter 2023 report. The company achieved revenue of 1,887 million yuan for the full year of 2022, -5.39% year on year; net profit of 168 million yuan, -19.97% year on year; net profit after deducting non-return mother's net profit was 143 million yuan, -18.02% year on year. At the same time, Q1 2023 achieved revenue of 483 million yuan in a single quarter, +0.97% year on year, +85.77% month on month; Guimu's net profit was 20 million yuan, +13.77% year on year, a significant improvement over the previous quarter.
Results for the full year of 2022 were under pressure, and OCA optical adhesive volume led growth: the company's overall performance in 2022 was -5.39% year on year, mainly affected by low demand for downstream consumer electronics products. In particular, in the fourth quarter, the company's sales and delivery were significantly affected by the external environment, leading to a decline in the profitability of functional film materials and film packaging materials. However, at the same time, the annual revenue of the company's electronic grade adhesive material sector was +26.43% year on year, and gross margin fell slightly to 47.46%, mainly due to the company's gradual release of OCA optical adhesives. With excellent product quality and a good customer base, the revenue of the electronic grade adhesive materials sector continued to grow, showing strong profit resilience. The company is a leading OCA optical adhesive enterprise in China. It cooperates with many well-known manufacturers and is expected to take the lead in domestic substitution, with remarkable growth.
Q1 2023 improved markedly month-on-month, and the business situation was improving: the Q1 results for 2023 released by the company improved markedly. The company achieved revenue of 483 million yuan, an increase of 0.97% over the previous year, net profit of 20 million yuan, an increase of 13.77% over the previous year, after deducting net profit of 15 million yuan, an increase of 13.35% over the previous year; and the month-on-month improvement was obvious, which was basically in line with previous expectations. The year-on-year increase in the company's 23Q1 performance was mainly due to a recovery in downstream demand for consumer electronics. It is expected that with the subsequent improvement in consumption conditions, combined with relatively strong demand in the second half of the year, the company's business situation is expected to continue to improve.
The volume of precision release film is imminent, and the production rate of self-built PET base films is high: the company continues to lay out membrane materials. According to the 2022 annual report data, the construction progress of the precision release film coating project is about 90%. It is expected that it can be completed and put into operation in 2023, and release is imminent. The project mainly targets OCA release films and MLCC release films. The former can be used to produce OCA optical adhesives in-house to improve gross margin levels; the latter can be used to produce MLCC, which is one of the main consumer fields for release films. At the same time, the construction progress of the company's PET2 and PET3 projects is 70% and 60% respectively. They are expected to be completed in 2023. After the project is implemented, the PET base film produced by the company itself can be used to produce release films, improve the integrated layout of membrane materials, and further increase the overall gross margin level. The increase is remarkable.
Investment advice: With the gradual recovery of consumer electronics, the leading edge of the company's OCA optical adhesives, and the integrated layout of membrane materials, we expect the company to achieve operating revenue of 29.25/37.15/4.333 billion yuan and net profit of 3.50/5548/691 million yuan in 2023-2025. The corresponding PE was 21.23/13.53/10.73 times, respectively, maintaining the “increase in holdings” rating.
Risk warning: Market competition heightens risks; downstream demand falls short of expected risks; risk of OCA business being put into operation falls short of expectations