The company released its 2023 annual report: During the reporting period, the company achieved revenue of 1,318 million yuan (YoY -20%), net profit of 174 million yuan (YoY -31%), net profit of 126 million yuan (YoY -54%) after deducting non-attributable net profit of 126 million yuan (YoY -54%). Among them, 23Q2 achieved revenue of 716 million yuan (YoY -8%, QoQ +19%) in a single quarter, realized net profit of 102 million yuan (YoY -11%, QoQ +41%), deducted non-attributable net profit of 60 million yuan (YoY -52%, QoQ -9%), and performance was basically in line with expectations.
23Q2 The company's comprehensive gross margin was 32.15%, with year-on-month changes of -6.84 pct and -6.76 pct, net margin of 15.12%, and year-on-month changes of -0.15 pct and +2.47 pct, respectively.
UV-curing materials are developing steadily, and the screen display and semiconductor materials businesses have entered a period of industry recovery. Benefiting from the development of 5G communication construction and the expansion of application scenarios for the company's new plastic coating material products, the company's UV curing materials business developed steadily. During the reporting period, it achieved revenue of 334 million yuan, an increase of 3.16% over the same period last year, and a gross profit margin of 33.08%, an increase of 2.40 pct over the previous year. In terms of screen display materials, 23H1 achieved revenue of 604 million yuan, a year-on-year decline of 13.71%, a year-on-year decline of 36.90%, and a year-on-year decline of 3.21 pct. Among them, 23Q2 achieved revenue of 336 million yuan in a single quarter, an increase of 25.43% over the previous quarter. This was mainly based on a month-on-month increase in terminal demand and orders, and driven by stocking orders from domestic manufacturers. The boom in the panel industry increased month-on-month. In terms of semiconductor materials, 23H1 achieved revenue of 260 million yuan, a year-on-year decline of 11.19%, a year-on-year decline of 35.97%, and a year-on-year decline of 2.32 pct. Among them, 23Q2 achieved revenue of 144 million yuan in a single quarter with the adjustment of the company's product structure, an increase of 24.22% over the previous quarter, and a significant quarterly improvement.
The pharmaceutical intermediates business has declined markedly, and new product research and development and new project construction have given the company the impetus for long-term growth. In the first half of 2022, demand for the company's pharmaceutical intermediate bromoacetonitrile products exploded, driving rapid business growth. However, since this year, due to the decline in demand for bromoacetonitrile and the impact of production cycles and production capacity, we have achieved revenue of only 85 million yuan during the reporting period, a sharp drop of 72.95% from the previous year. 23H1 continues to increase R&D innovation, with a total R&D investment of 89 million yuan, accounting for 6.77% of revenue.
In terms of new product development, cholesteric electronic paper LCDs and PI-less LCDs have achieved client-side verification, and i-Line photoresist and 248nm photoresist anti-reflective layer materials have achieved partial customer volume. At the same time, the company has many projects under construction, involving various business segments such as screen display materials, semiconductor materials, and pharmaceutical intermediates. The continuous promotion of new projects effectively guarantees the company's high-quality and sustainable development in the future.
Investment analysis: The recovery in consumer electronics demand fell short of expectations, and the pharmaceutical business declined significantly. The company's net profit forecast for 2023-2025 was lowered to 401, 505, and 619 million yuan (original values were 489, 6.06, and 760 million yuan). The current market capitalization corresponding to PE is 20, 16, and 13X respectively. According to Wind's unanimous expectations, comparable to the company Ruilian New Materials, the average PE for 800 million in 2023 is 21X, maintaining the “increase” rating.
Risk warning: 1) The recovery of downstream demand fell short of expectations; 2) increased competition in the industry led to a decline in product profits; 3) New product market development fell short of expectations; 4) The company received the “Regulatory Letter on Feikai Holdings Co., Ltd. and Zhang Yanxia” from the Shenzhen Stock Exchange on June 15, 2023, which is a special reminder of concern.