Incident: The company announced its 2023 performance forecast. It is expected to achieve full year operating income of 51.49-6.179 billion yuan, +0.00% ~ 20.00%; net profit to mother of 14.29-1,655 billion yuan, -5.00% ~ +10.00% year-on-year; deducted non-net profit of 10.37-1,306 billion yuan, -15.00% to +7.00% year-on-year.
Full year results are in line with expectations. In terms of median value, the company is expected to achieve revenue of 5.664 billion yuan, +10.00% year on year; net profit to mother of 1,542 billion yuan, +2.50% year over year; after deducting non-net profit of 1,172 billion yuan, -4.00% year on year, the performance is in line with expectations. On a quarterly basis (in median terms), 23Q4 is expected to achieve revenue of 1,559 million yuan, +30.55% month-on-month; net profit to mother of 400 million yuan, +52.76% year-on-year, -2.61% month-on-month; and deducted non-net profit of 294 million yuan, +64.80% year-on-year and -4.90% month-on-month.
The MLCC industry cycle rebounded steadily in 22Q4. The MLCC industry entered a downward cycle in 21Q3, and inventory levels continued to rise. MLCC manufacturers instead adopted a cautious procurement strategy focusing on inventory removal. By the 22Q3 industry bottomed out at an accelerated pace, the operating rate of the original factory had reached the bottom of the cycle, and the industry's inventory level gradually fell back to a healthy level. With the gradual recovery of demand in downstream consumer electronics and other industries, combined with technological breakthroughs and quality improvements in the company's products, orders for some of the company's products have steadily rebounded, and actual business conditions have continued to improve.
The recovery in the industry cycle is compounded by the continuous release of high-capacity and automotive-grade MLCCs, helping to increase performance. The company's MLCC products continue to develop in the direction of high capacity, miniaturization, high reliability, etc., and continuously achieve product technology breakthroughs and quality improvements. Market recognition has gradually increased, and the coverage of downstream application fields is becoming more and more extensive. 1) High Capacity: High capacity market space is broad. Currently, the market is basically monopolized by Japanese and Korean manufacturers. The company achieved high-capacity MLCC 0-1 batches in '22, and will continue to seize the share of Korean and Japanese manufacturers in the future with high cost performance; 2) Vehicle regulation: As automobile electrification and intelligence continue to penetrate, demand for automotive-grade MLCCs has increased significantly. The company's automotive-grade MLCCs have been sold in bulk. In addition, the company's ceramic substrate, paste, PKG and other businesses are gradually recovering along with downstream demand; demand for SOFC diaphragm panels continues to be strong.
Profit forecast: The company's revenue for 2023-25 is estimated to be $56.97, 70.45, and 9.071 billion yuan, respectively; net profit to mother is 1,542, 19.04 billion yuan, and 2,508 billion yuan, respectively, giving a “buy” rating.
Risk warning: The progress of mass production of automotive-grade MLCCs falls short of expectations; the recovery in consumer electronics demand falls short of expectations, etc.