The company's Q3 performance improved, and profitability increased month-on-month. In the first three quarters of 2023, the company achieved revenue of 927 million yuan, an increase of 1.91% over the previous year, and net profit of 169 million yuan, an increase of 0.24% over the previous year.
Among them, Q3 had quarterly revenue of 345 million dollars, up 13.82% year on year, up 12.46% month on month; net profit was 63 million yuan, up 14.27% year on year and 68.61% month on month. The reason for the increase in the company's Q3 performance may be: (1) the recovery in downstream demand has led to an increase in drill needle production capacity utilization; (2) functional film products have begun to be released. In terms of profitability, the gross profit margin for the first three quarters of 2023 was 37.71%, down 0.64pct year on year, and the net profit margin was 18.26%, down 0.28pct year on year. , a slight decline. The gross margin for the Q3 quarter was 40.18%, up 6.48pct month on month, net profit margin 18.43%, up 6.15 pct month on month, and profitability began to recover.
The company's membrane products are expected to gradually be replaced by domestic production, which is expected to become a new growth curve for the company. Currently, the company's membrane products mainly include the following four categories: (1) Mobile phone security film products: The company's products are positioned in the middle and high-end markets. It is expected that domestic replacement will gradually be achieved in the future, and batch supply has already been achieved. (2) Explosion-proof film products for household appliances: mainly used in glass panels and covers of high-end home appliances, and the downstream sector is mainly in the smart home industry such as high-end home appliance brands; (3) Vehicle light control film products: Currently, the competitive pattern is high in industry concentration, and market share is mainly controlled by a few foreign companies. In the future, companies are expected to achieve domestic replacement. (4) AG explosion-proof film products: Mainly used in the Mini LED field. At present, the company has gradually entered the certification system of downstream manufacturers, and some have begun to be supplied in small batches.
The production capacity of CNC tools will be greatly increased in the future, and the Thai factory will help the company expand its international business. According to the company's announcement, the company plans to make structural adjustments to the production capacity scale in the “Precision Tool Product Expansion Project”. Among them, the production capacity of CNC tools will increase to 9.6 million units/year (1.8 million units/year before adjustment), and the expansion of CNC tool production capacity will increase the company's performance. In addition, the Thai factory plans to begin trial production in 2024Q1. Currently, the initial monthly production capacity of the drill needle plan is 3-5 million sticks. In the future, according to market expansion progress, the monthly production capacity of cutters is temporarily planned to 500,000 pieces. The specific expansion schedule will be gradually adjusted according to orders from overseas customers.
Investment suggestions: We expect the company's net profit from 2023-2025 to be 2.40, 3.13, and 376 million yuan respectively, corresponding to PE of 39, 33, and 28 times, respectively, maintaining the “increase in holdings” rating.
Risk warning: risk of technology substitution, fluctuating raw material prices, new business expansion falling short of expectations