3Q23 performance is lower than we expected.
Feikai material announced 1-3Q23 results: revenue was 2.026 billion yuan, down 9.54% from the same period last year; net profit was 210 million yuan, corresponding to 0.40 yuan per share, down 34.4% from the same period last year; and 177 million yuan was deducted from non-net profit, down 48.55% from the same period last year. Among them, 3Q23 achieved revenue of 709 million yuan, same / month change + 19.0% torque 1.0%; return to the mother net profit of 36 million yuan, corresponding to earnings per share of 0.07 yuan; same / month change of-46.9% torque 64.7%, which is lower than our expectations. The decline in the company's net profit from the previous month was mainly due to a decrease of 45 million yuan in profit and loss from the fair value of transactional financial assets. 3Q23 deducts non-net profit of 50 million yuan, with the same / month-on-month change of-29.6% CPM 16.4%.
Trend of development
Affected by the end of the peak season of 3Q panel stock, the screen shows that the demand for materials has picked up and slowed down. Since 2Q23, the screen display material industry has entered a recovery period, driving the company's quarterly screen display material revenue growth month-on-quarter, 3Q with the downstream stock coming to an end, the company shows that material revenue is basically flat. Looking forward, as the liquid crystal mixed crystal localization rate continues to improve and panel photoresist and other business expansion, we expect the company's screen display materials are expected to continue to grow.
New product layout and new project construction are expected to contribute to the company's long-term growth. According to the announcement, in the first half of the year, the company launched a new generation of photoinitiator (TMO) products, while the company cholesteric electronic paper liquid crystal and PILess liquid crystal have achieved client verification, we expect that the company liquid crystal will continue to expand to the non-display field in the future. In addition, the company announced that I-line photoresist and 248nm photoresist antireflective layer materials have achieved mass production for some customers. In terms of projects under construction, the company continues to promote the mixed crystal / single crystal production capacity and R & D center, the upgrading of photoresist products and the sublimation and purification of OLED terminal display materials, which we think will help the company achieve long-term growth.
Profit forecast and valuation
Due to the relatively large month-on-month decline in the profit and loss of 3Q23 fair value changes and the weakening demand on the material side due to the pullback of the downstream panel growth rate, we have lowered the 24-year profit forecast of 2023 Universe by 21% to 320 million yuan and 420 million yuan, respectively. The company's stock price corresponds to the 24-year price-to-earnings ratio of 24.8 pounds and 19.0x. We are optimistic that the long-term growth of the company will be driven by capacity and category expansion, keeping the target price unchanged at 20 yuan, corresponding to 33% rising space and the 24-year price-to-earnings ratio of 33% and 25.3x in 2023 Universe, and maintaining an outperforming industry rating.
Risk
The sales of TFT liquid crystals are lower than expected, and the demand for semiconductor materials and UV curing materials is lower than expected.