Event: The company released its 2023 three-quarter report. In the first three quarters of 2023, the company achieved revenue of 1,129 billion yuan, -19.51% year-on-year, and net profit of 122 million yuan, net profit of 122 million yuan, or -34.63% year-on-year. Among them, the third quarter achieved revenue of 389 million yuan, -25.14% year-on-year, +1.83%; net profit of the mother was 47 million yuan, -30.77% year-on-year, and +35.84% month-on-month.
Results for the first three quarters remained under pressure year on year, and Q3 improved month-on-month. The company's performance in the first three quarters of 2023 is still under pressure year on year. The main reason is that rare gases were affected by supply in 2022, and the volume and price of rare gases increased a lot, while rare gas prices returned to normal levels in 2023; as well as poor demand for downstream consumer electronics and a decline in semiconductor factory utilization. The company's revenue and net profit for the third quarter of 2023 both rebounded month-on-month. The main reason was the increase in the competitiveness of the company's products, which were recognized by downstream customers, and the price and gross profit of the company's export products increased. In the first three quarters of 2023, the company achieved a gross profit margin of 30.21%, a year-on-year increase of 2.42pcts, a significant improvement in gross margin; a net profit margin of 10.83%, a year-on-year decrease of 2.43pcts. As the downstream semiconductor industry adjusts at the bottom, the semiconductor industry continues to remove inventory, and consumer electronics pick up, corporate demand is expected to pick up.
The product structure continues to be enriched, and downstream customer verification continues to advance. The company continues to extend the industrial chain, establish overseas bases, optimize production lines, and expand categories. After a long period of product development and certification, the company has successfully achieved customer coverage of more than 90% of domestic integrated circuit manufacturers over 8 inches. At the end of 2022, the company's germanium products passed the certification of the 5nm process production line of Korea's largest memory company, and orders have already been placed; the ethylsilane project has completed the production line installation. Currently, in the small trial stage, the test products have been certified by some downstream customers and are in a state of certification.
The project is progressing smoothly, helping the company to develop in the long term. The company plans to sign the “Walt Semiconductor Materials Research and Development Headquarters Project Investment Agreement” with the People's Government of Sanjiao Town, Zhongshan City, Guangdong Province, to build a semiconductor gas R&D and production center in Zhongshan, Guangdong, which is planned to be used for ultra-clean high-purity special gas production, relieve some of the production capacity pressure of the company's Foshan headquarters, and lay a solid foundation for the company's future development in Guangdong, with a total investment of 800 million yuan. In addition, the company's “semiconductor material construction project with an annual output of 1,764 tons” is progressing smoothly, mainly to produce high-purity carbon monoxide, high-purity nitric oxide, hexafluoropropane and isomers, hydrogen bromide, boron trichloride, and ultra-high purity hydrogen. The company actively carries out project construction, expands production capacity and product categories, and helps the company's long-term development.
Profit forecast and investment advice: Affected by the decline in rare gas prices in the first three quarters and the weak demand side, we lowered the company's profit forecast. The net profit forecast for 2023-2025 was 186 million, 244 million, and 301 million respectively, corresponding to the current PE of 47 times, 36 times, and 29 times, respectively.
The company is committed to the localization of specialty gases, continues to develop and introduce new types of specialty gases, and continuously enhances competitiveness through R&D and business layout. As the semiconductor industry develops and the localization of electronic specialty gases continues to advance, we are optimistic about the company's long-term development and maintain a “buy” rating.
Risk warning: downstream demand falls short of expectations, new business progress falls short of expectations, capacity release falls short of expectations, R&D falls short of expectations, raw material price fluctuations, etc.