The performance of 1-3Q is slightly lower than market expectations.
The company announced 1-3Q23 results, achieving revenue of 1.129 billion yuan, year-on-year-19.5%; return to the mother net profit of 122 million yuan, year-on-year-34.6%, corresponding to earnings per share of 1.01 yuan, the performance was slightly lower than market expectations, mainly due to the decline in product prices. Among them, 3Q23 realized revenue of 389 million yuan and net profit of 47 million yuan.
We believe that the decline in performance in the first three quarters is mainly due to (1) a substantial decline in the prices of rare gases and photoetching gas, and a sharp drop in profits. (2) the global semiconductor industry is in the doldrums and downstream demand is weak.
During the reporting period, the company's sales expenses increased by 19.9% to 71 million yuan, management expenses increased by 3.2% to 71 million yuan, R & D expenses decreased by 27.1% to 36 million yuan, and financial expenses increased by 29 million yuan.
In addition, it should be noted that the company's projects under construction reached 292 million yuan at the end of the third quarter, a substantial increase compared with the beginning of the year.
Trend of development
Plan Zhongshan R & D and production center to promote long-term growth. The company disclosed that it plans to invest 800 million yuan to build a semiconductor gas R & D and production center in Zhongshan City for ultra-clean and high-purity special gas production to relieve headquarters pressure. The project is invested in stages, of which 396 million yuan is invested in fixed assets. We believe that the project is expected to ease the company's capacity bottleneck and contribute to the company's long-term growth.
The localization of the electronic special gas industry continues to advance, and the company promotes germanium, silane and other new products. According to the data of China Semiconductor Industry Association, the size of China's electronic special gas market in 2022 was 23.1 billion yuan, an increase of 6.94% over the same period last year. At present, the domestic self-produced electronic special gas market share is relatively small. According to the statistics of the China Industrial Gas Industry Association, our country can only produce about 20% of the electronic special gas varieties for integrated circuit production, showing a lack of high-end production capacity and relying on imports. The company's germanium products are expected to be officially mass produced this year, and we expect 4Q23 or formal production to enter the Korean customer 5nm advanced process; in addition, the company's silane project is also actively promoted and may be expected to enter the 2nm process in the future.
Profit forecast and valuation
In the downward cycle of the semiconductor industry, we cut our 24-year earnings forecast for 2023 by 15% to 1.95 billion yuan, with the current share price corresponding to 27 times 2024 earnings. Maintain an industry rating that outperforms.
Taking into account the performance reduction, we lowered our target price by 17% to 75.0 yuan, corresponding to 32 times 2024 price-to-earnings ratio, which has 19% upside space compared to the current stock price.
Risk
The progress of the increase in the company's market share is not as expected; the downstream capacity expansion is not as expected; and the competition in the industry is intensified.