The company released its third quarterly report for 2023, and its performance fell short of expectations. During the reporting period, the Company realized revenue of RMB 1.507 billion yuan (YoY-7%), net profit of parent company of RMB 84 million yuan (YoY-50%) and net profit of deduction of non-parent company of RMB 61 million yuan (YoY-60%). Among them, 23Q3 realized revenue of 529 million yuan (YoY-10%, QoQ+7%) in a single quarter, net profit of parent company of 20 million yuan (YoY-74%, QoQ-55%), net profit of deduction of non-parent company of 10 million yuan (YoY-86%, QoQ-72%), and the performance of single quarter was lower than expected. 23Q3 Company's comprehensive gross profit margin was 29.47%, with same-month and month-on-month changes of-2.52pct and-0.05pct respectively, net interest rate 3.74%, same-month and month-on-month changes of-9.42pct and-5.21pct respectively.
In terms of expenses, 23Q3 Company increased investment in OCA optical adhesive film and new energy materials, and the R & D expenses increased significantly to RMB 70 million yuan (YoY+124%, QoQ+143%), which dragged down Q3 performance. At the same time, the company announced that 23Q3 received government subsidies totaling 70,779,636.30 yuan, including deferred income of 69,428,247.30 yuan and other income of 1,351,389.00 yuan.
Downstream demand is still weak, R & D expenses have increased significantly, and multiple factors have dragged down 23Q3 performance. The demand for electronic terminal products in Q3 remained weak, and the recovery rate of panel industry was less than expected, resulting in the short-term pressure on the company's performance. At the same time, 23Q3 Company continued to increase R & D investment, with R & D expenditure of RMB 70 million yuan in a single quarter, with a year-on-year growth of 124% and a month-on-month growth of 143%, which greatly dragged down its performance. In addition, since 2023, the company's projects under construction have been consolidated for six consecutive years, and the fixed assets of Q1, Q2 and Q3 have increased by 226 million yuan, 126 million yuan and 628 million yuan respectively, resulting in further pressure on performance due to depreciation and amortization expenses. Subsequently, with the launch of a new generation of Mate 60 Pro on August 29, Huawei officially announced the launch of Mate 60 Pro, and launched new products such as Mate 60 Pro+ and Mate X5 folding machine for the sixth time. Superimposed Glory, OPPO and other brands also released new models for the sixth time, driving the recovery of demand end. We expect that the performance recovery driven by 23Q4 demand will gradually be reflected.
Layout PET base film production capacity upward, expand medium and high-end product production capacity downward, optimistic about the company's OCA optical adhesive film, new energy materials and other accelerated volume. The company is a leading functional coating composite platform enterprise in China, planning 3 PET optical base film production lines upstream. At the same time, the company has successively made breakthroughs in medium and high-end products, and has successively invested and built a number of production lines for OCA optical adhesive film, MLCC release film and polarizer functional film.
In terms of OCA adhesive film, the company has made breakthroughs in some terminal brands. Huawei Mate X5, Glory Magic Vs2 and other new folding models all adopt the company's products. Meanwhile, the company actively enters into the repair market and white brand market, and the verification work of panel factory is also in the orderly progress, laying a foundation for the next step, and will take the lead in sharing the vast alternative market in China. In addition, new energy materials are also an important direction for the company's development. At present, the company has carried out business cooperation with some new energy vehicles and battery manufacturers to supply relevant insulating materials.
Investment analysis opinion: 23Q3 performance fell short of expectations, the sixth consecutive solid conversion of projects under construction brought depreciation and amortization expense pressure, and the company's net profit forecast for 2023-2025 was lowered to 156 million yuan, 329 million yuan and 544 million yuan.(The original value is 2.18, 3.92 and 613 million yuan, temporarily excluding government subsidies included in deferred income). The current market value corresponds to PE of 43, 21 and 13X. The company's integrated layout has advantages. It is optimistic that OCA film will soon enter the heavy volume period. It is estimated that the compound profit growth rate will reach 87% from 2023 to 2025, corresponding to PEG valuation of 0.5X in 23 years. The valuation premium brought by the company's future growth has not yet been fully reflected. Maintain "overweight" rating.
Risk warning: 1) The terminal demand for electronic consumer goods is less than expected;2) The introduction of new products such as OCA film is less than expected;3) The supply and price of raw materials fluctuate greatly;4) The Company received the supervision letter from Shenzhen Stock Exchange on March 27,2023, which is particularly concerned.