The company released its three-quarter report for 2023, with revenue of 668 million yuan in the first three quarters, an increase of 21.97 percent over the same period last year, and a net profit of 95 million yuan, an increase of 36.87 percent over the same period last year. Of this total, Q3 achieved an income of 250 million yuan in a single quarter, an increase of 21.75% over the same period last year, and a net profit of 41 million yuan, an increase of 36.85% over the same period last year.

The production capacity of the Hefei plant has been released and revenue has maintained rapid growth. The company's Q3 revenue increased by 21.75% over the same period last year, continuing the trend of rapid growth, with a month-on-month growth of 6.8%. It is mainly due to: 1) the panel mask plate is counter-cyclical, and the panel customers increase the utilization rate of production capacity and strengthen the development of new products to drive the demand for opening moulds, while the company's Hefei factory takes advantage of the situation and continues to release production capacity. 2) in terms of semiconductor chip mask business, with the company's market expansion and production capacity increase, revenue has also achieved rapid growth.

Capacity climbing overlay structure optimization, profitability continues to improve. In the first three quarters of 2023, the company's gross profit margin increased by 26.51% compared with the same period last year, with a year-on-year increase of 1.9pct, of which Q3 single-quarter gross profit margin increased by 29.48%, respectively, compared with the previous quarter. This is mainly due to the continuous improvement of the company's capacity utilization, the structural optimization of products and customers, the increase in the proportion of middle and high-end products such as AMOLED/LTPS, and the continuous improvement of product profitability.

In terms of expenses, the company's Q3 expense rate is basically stable compared with the same period last year, while the management / R & D expense rate decreased by 0.56/1.18pct, while the sales expense rate increased slightly by 0.17pct. The net cash flow of operating activities in the first three quarters was 144 million yuan, and the quality of operation was sound.

Promote the "flat panel display + semiconductor" two-wing strategy, the domestic mask leading space is huge. The market size of panel mask is about 50-6 billion yuan. We expect the company's share this year to be 10% and 15%. There is still a lot of room for replacement. With the introduction of new lithography machines, the sales scale will continue to expand. According to the SEMI report, the IC mask market in 2022 is about US $5.2 billion, which continues to grow. Data show that the third party accounted for 35% of the semiconductor mask market in 2019 (mainly mature processes). The company's 180nm products have been delivered to a number of customers, simultaneously carrying out the process research and development of 130nm-65nm semiconductor chip mask and the mask process development planning for 28nm semiconductor chip. There is a huge space for domestic alternatives. The company plans to invest 3.5 billion yuan to build a production base in Foshan, including "high-precision mask production base construction project" and "high-end semiconductor mask production base construction project". The company's revenue and profit scale is expected to rise to a higher level. We maintain our previous profit forecast and expect the company's net profit from 2023 to 2025 to be 1.45,2.02 and 268 million yuan respectively, and the previous share price (closing price on October 30, 2023) PE is 42.2,30.2,22.8 times, maintaining the "overweight" rating.

Risk hint: the market competition intensifies and the progress of IC mask development is low.