Incident: On August 28, the company released its annual report for 23 H1. 23H1 achieved revenue of 2,075 million yuan, -2.0% year-on-year, net profit of 85 million yuan, -76.9% year-on-year, after deducting non-net profit of 68 million yuan, -66.1% year-on-year.
Performance improved month-on-month, in line with expectations. On a quarterly basis, 23Q2 achieved operating income of 1,142 billion yuan, +12.37% year on year and +22.25% month on month; net profit of 27 million yuan, -85.75% year on year, -54.11% month on month; after deducting non-net profit of 36 million yuan, -55.59% year on year, +14.20% month on month. The month-on-month improvement in 23Q2 performance is mainly due to the company's continuous strengthening of market development. Sales of its main products MLCC, chip resistors, and 23H1 inductors increased 37.45%, 24.55%, and 45.95%, respectively.
The gross margin increased month-on-month, and the cost ratio decreased year-on-year during the period. 1) Gross profit margin: 23H1 gross margin was 12.97%, year-on-year -10.74pct, of which 23Q2 gross margin was 14.51%, year-on-year -7.80 pct, +3.44 pct month-on-month.
Along with a slight recovery in operating rate, the company's gross margin is expected to recover quarterly in '23. 2) Expenses for the period:
The company focuses on opening up resources and saving money and continues to promote cost reduction and cost control. The cost rate for the 23H1 company period was 7.70%, year-on-year -2.29pct. Among them, sales, management, R&D, and financial expenses rates were 1.53%, 5.94%, 4.95%, and -4.72%, respectively, and -0.17, -0.21, +0.22, and -2.13pct, respectively.
Focus on recovering the industry boom and be optimistic about the company's high-end layout. The company continues to focus on high-end transformation. 1) Production capacity side: The third phase of the Xianghe Project, which targets the industrial-grade and high-end consumer markets, was officially put into trial production; the “monthly output of 4 billion laminated inductors” and the “monthly output of 100 million integrated inductors” technical reform and expansion projects with an investment of 600 million yuan and implementation were completed and project construction began. 2) Product side: 12 new specifications of high-end MLCCs were delivered for production, 5 of which were delivered in small batches, the pressure resistance level of medium and high capacity MLCCs was increased by more than 2 levels, and the development and conversion rate of high-capacity products was further improved; at the same time, 4 key materials were exported. Copper electrode paste for thick film resistors was completed for the first time in China and delivered in small batches, and a new high-reliability high-voltage ceramic material was completed for the first time in China, greatly improving the rated voltage and reliability of MLCC.
Profit forecast: Based on the progress of terminal demand recovery being lower than previously anticipated, net profit for 23-25 years was lowered to 2.80/6.13/930 million yuan (previous value was 468/8.13/1,087 million yuan) to maintain the “buy” rating.
Risk warning: Terminal demand recovery falls short of expectations; mass production of high-end products falls short of expectations, etc.