Incident: On October 30, 2023, the company released its 2023 three-quarter report. The first three quarters achieved a total revenue of 188 million yuan, +5.19% year-on-year; net profit of 26 million yuan, -33.36% of the previous year; net profit of 26 million yuan, minus 33.36%; and deduction of non-net profit of 23 million yuan, -41.44% year-on-year. Among them, Q3 achieved revenue of 48 million yuan in a single quarter, -30.75% year-on-year and -41.46%; net profit of 0.3 billion yuan, -82.18%, -82.01% month-on-month; and non-net profit of 0.3 billion yuan, -83.93% year-on-year.
Production line upgrades are dragging down current performance, and the fourth quarter is expected to improve month-on-month: the company upgraded its main production lines in the third quarter of 2023. The modified production line can achieve efficient and stable batch production of PEEK, improve product quality and production efficiency, and will be more conducive to the company's development of the PEEK application market. According to the company announcement, the company's R&D expenses in the current period were about 6.97 million yuan, and R&D investment accounted for about 14.46% of operating income, an increase of 137.24% over the previous year. At the same time, the company also adjusted the sales price of the product by a corresponding margin in response to the different purchase volumes of customers. On the one hand, it helped the company strengthen its cohesiveness with downstream customers; on the other hand, it also helped the company to further expand customers and increase application areas, so that the company could increase product shipments in the future. With the completion of the upgrade of the company's main production line, it is expected that the fourth quarter performance will pick up somewhat.
The application in the medical field has bright spots, and the actual controller's extended share lockdown period reflects the company's confidence in development: the company's main product, PEEK, has good biocompatibility, can be used to produce artificial spine implants, artificial joints, orthopedic replicas, and dental materials, etc., and has high added value. With the advancement of the localization process of PEEK and the gradual promotion and application of PEEK in the medical field, this sector is expected to drive rapid growth in the company's performance.
At the same time, the company issued an announcement on 2023.10.28. The actual controllers, Mr. Xie Huaijie, Ms. Xie Yuning, and Mr. Bi Xin, held by the actual controllers, were extended for 6 months until March 20, 2027. The actual controller's extended share lockdown period also showed confidence in the company's development and long-term optimism about the company's growth.
Investment advice: The company is a leading PEEK enterprise in China, with deep technology accumulation, and has gradually expanded into fields such as semiconductors, new energy, and medical care, with significant growth. We expect the company to achieve operating income of 257/3.22/397 million yuan and net profit of 0.48/0.90/128 million yuan in 2023-2025. The corresponding PE is 66.21/35.82/25.01 times, respectively, maintaining the “increased holdings” rating.
Risk warning: New production capacity cannot be put into operation as expected, downstream demand falls short of expected risk, and introduction of new fields falls short of expected risk