The decline in 2023Q2 revenue has narrowed, and the bottom of the industry is likely to be reached. Performance is expected to pick up. According to the 2023 semi-annual report, 2023H1's revenue was 583 million yuan, down 4.03% year on year; net profit for Gimu was 106 million yuan, down 6.62% year on year. 2023Q2 revenue fell 2.28% year over year, narrower than in the first quarter.
The decline in revenue and profit is mainly due to the slowdown in demand in downstream consumer electronics and other industries, the continued decline in the boom in the PCB industry, and structural changes in industry demand that intensified market competition. We lowered our profit forecast. We expect the company's net profit to be 234/379/508 million yuan (original value was 314/ 4.54/607 million yuan) from 2023-2025, EPS is 0.57/0.92/1.24 yuan, and the PE corresponding to the current stock price is 35.3/21.8/16.3 times. According to Prismark estimates, 2023H1 is the low demand point in the global PCB market. It will pick up in the second half of the year. The 2023Q3PCB industry market size is expected to be +1.6% year on year, and the 2023Q4 market size is expected to be +5.2% year on year. As a PCB drill pin leader in self-developed core equipment, the company will benefit from rising downstream demand, its own cost optimization and product upgrades, achieve a steady increase in profit levels, and maintain its “buy” rating.
The decline in downstream operating rates is dragging down gross profit margins, and future increases in factory automation rates will drive up the company's profit margin 2023H1. The company's gross sales margin was -2.35 pcts year-on-year. The decline in gross sales margin was mainly due to the decline in the operating rate of the downstream PCB industry and the decline in the company's capacity utilization rate. The 2023H1 company's period expense ratio was +1.96 pcts year over year, and net interest rate was -0.48 pcts year over year. The increase in the fee rate during the period was mainly due to the company's accrued sales commissions and increased remuneration, and the sales expense rate increased by 2.51 pcts over the same period last year. The company focuses on technological innovation and human efficiency improvement, and 2023H1 R&D investment increased 15.58% year-on-year. The company's research projects in 2022 include automated equipment such as intelligent warehousing and logistics projects and AI visual inspection equipment. The newly built production capacity raised on the market will increase the degree of factory automation, leading to an increase in net interest rates.
PCB drill pins continue to be upgraded at the high-end level, and functional film products are expected to open a second growth curve. The company continues to optimize the PCB drill product structure, expand the production capacity of high-end products such as micro drills with a diameter of 0.2 mm or less, increase the share of coated drill products, strengthen research and development of drill pins with a high length-to-diameter ratio, and enhance the company's overall competitiveness. Currently, the market share of automotive light control films is controlled by a small number of foreign players. The company will seize the “window period” for the rapid development of new energy vehicles, accelerate the development and marketing of vehicle light control films, and actively participate in the early development, sampling and certification of automotive light control films. It is expected that batch supply will be achieved soon, starting the company's second growth curve.
Risk warning: PCB market demand recovery falls short of expectations; expansion and promotion of new products falls short of expectations.