Event Overview: On August 24, the company released its semi-annual report for 2023. In the first half of the year, the company achieved operating income of 700 million yuan, an increase of 10.60% over the previous year, achieved net profit of 79 million yuan, an increase of 1.18% over the previous year, and achieved net profit of 70 million yuan after deducting non-return income of 70 million yuan, an increase of 6.83% over the previous year. Looking at Q2 in a single quarter, we achieved revenue of 371 million yuan, up 8.89% year on year, 12.91% month on month, net profit of 43 million yuan, up 1.01% year on year, and 18.19% month on month.
Performance increased steadily. Electronic ceramic cases for communication devices achieved double-digit growth, and the precision ceramic parts business grew significantly: the company's overall performance was steady, revenue and net profit increased by 10.60% and 1.18%, respectively, and the overall gross profit margin was 25.90%, down 2.24 pct from the previous year. By business, 1) Electronic ceramic cases for communication devices achieved revenue of 520 million yuan, an increase of 10.25% over the previous year, accounting for 74.21% of revenue. The gross profit margin was 25.32%, a decrease of 2.15 pct. The company's product transmission rate covers 2.5 Gbps to 800 Gbps. As a leading manufacturer of electronic ceramic cases in China, it is expected to benefit from the 800G demand volume brought by AI in the future; 2) The consumer electronics ceramic case and substrate business achieved revenue of 95 million yuan, an increase of 0.11% over the previous year, accounting for 13.59% of revenue, and a gross profit margin of 29.57%, a year-on-year decrease of 2.27 pct. The fund-raising project is currently still under construction. It is expected to be put into operation one after another by the end of this year. After completion, the project will reach a production capacity of 4.405 billion consumer electronic ceramic products; 3) the automotive electronics business will achieve revenue of 47.57 million yuan, an increase of 46.60% over the previous year; 4) the precision ceramic parts business will achieve revenue of 10.72 million yuan, an increase of 100% over the previous year.
The layout of the precision ceramic parts sector promotes domestic substitution, and accelerated revenue growth is expected to fully open the ceiling for growth: precision ceramic parts are core components for semiconductor equipment prepared using advanced ceramics such as alumina and aluminum nitride after precision processing. They have excellent properties such as high strength, corrosion resistance, and high accuracy. They are used in key semiconductor equipment such as etchers, glue coating projectors, lithography machines, and ion implanters. Typical products include ceramic heating plates, electrostatic chucks, etc. Judging from current progress, the company has developed core materials and supporting metallization systems for aluminum oxide and aluminum nitride for precision ceramic parts, established a complete manufacturing process platform for precision ceramic parts, and developed ceramic heating plate products has reached the level of similar international products and has been verified by users. It has achieved localization of key components and has been applied in batches to key domestic semiconductor equipment.
The asset restructuring was officially approved, and it officially entered the GaN and SiC high growth race track: On July 12, 2023, the company issued an announcement and received the “Approval to Register Hebei China Porcelain Electronic Technology Co., Ltd. to issue shares to purchase assets and raise supporting funds” issued by the China Securities Regulatory Commission. Since then, the company has entered the GaN and SiC high growth track through the acquisition of high-quality assets, and is expected to begin a period of accelerated development.
Investment advice: We expect the company's net profit from 2023-2025 to be 230/3.24/460 million yuan, respectively, and the corresponding PE multiplier is 92X/65X/46X. As the leading electronic ceramic shell in China, the company has outstanding technical capabilities and is accelerating the promotion of domestic substitution in the field of electronic ceramics. At the same time, the layout of the high-growth circuit in the field of precision ceramic components and third-generation semiconductors (GaN, SiC) is expected to further expand the company's future growth space. Maintain the “Recommended” rating.
Risk warning: The construction progress of fund-raising projects falls short of expectations, and competition in the industry intensifies.