occurrences

The company released its report for the third quarter of 2023. 2023Q1-Q3 achieved revenue of 927 million yuan, +1.91% year-on-year; net profit of the mother was 169 million yuan, +0.24% year-on-year. Looking at Q3 alone, the 23Q3 company achieved revenue of 345 million yuan, +13.82% year-on-year, +12.46%; net profit of the mother was 63 million yuan, +14.27% year-on-year, and +68.59% month-on-month.

Comment:

Downstream demand is picking up, and the main PCB drill industry has bottomed out and rebounded. Since the second half of 2023, thanks to the recovery in demand in the downstream PCB industry, the capacity utilization rate of the company's PCB drill needle business has increased markedly compared to the first half of the year, driving a year-on-year increase in 2023Q1-Q3 drill needle shipments, and the average product price has also begun to stabilize.

At the same time, the gross margin of the company's drill needle business also improved in the third quarter, mainly because (1) the company continued to further promote digital transformation in recent years to help improve production efficiency and product yield, and the results of cost reduction and efficiency gradually became apparent; (2) continued optimization of the product structure, and the proportion of high-value-added micro drills and coated drills increased; (3) downstream demand picked up market competition, and at the same time, increased capacity utilization led to scale effects.

New products such as functional films and intelligent storage equipment for drill needles have begun to be released. While the company continues to deepen its cultivation in the PCB field, it is also actively focusing on emerging industries related to its main business and having good growth. In terms of functional film products, etc., the company's mobile phone security film products are positioned in the middle and high-end markets and have domestic replacement attributes. At present, product development and customer development have basically been completed and have entered the release stage. The revenue scale of 2023H1 film products has surpassed the whole of 2022. In terms of automated equipment, the company's intelligent drill needle storage system can help customers achieve intelligent drilling workshops, traceability of drill needle products, and full life cycle management, filling gaps in the industry. After being introduced to the market in 2022, it began to enter the acceptance period this year. Q3 has already begun to contribute a significant increase in revenue.

The mobile phone material system has changed to titanium alloy, and strong demand for related processing tools has led to rapid growth in the company's CNC tool business. As Huawei and Apple launched titanium alloy 3C products one after another this year, brands such as Samsung and Xiaomi followed suit. The 23Q3 related titanium alloy processing tool market is in short supply. Thanks to the 3C tool manufacturing experience accumulated by the company over many years, the company has successfully cooperated with several leading brands such as Apple and achieved batch supply. At the same time, in order to meet the potential future needs of customers, the company issued an announcement to adjust the production capacity structure of the fund-raising project, increasing the proposed production capacity of the CNC tool business from 1.8 million units/year to 9.6 million units/year.

Profit forecast: In 2023-2025, the company's net profit from the mother is expected to be 2.43/311/404 million yuan, +9.03%/+28.04%/+30.02% year-on-year, corresponding to EPS 0.59/0.76/0.99 yuan, corresponding to the current stock price of PE 34.53/26.97/20.74 times. First coverage, giving the company an “increase in holdings” rating.

Risk warning: downstream demand falls short of expectations; market competition intensifies; market development falls short of expectations