Description of the event
The company released its 2023 annual report. For the full year of 2023, the company achieved operating income of 2,481 billion yuan, up 22.30% year on year (after adjustment, same below), net profit of 121 million yuan, up 291.41% year on year, net profit after deduction of 122 million yuan, up 166.31% year on year; Q4 achieved operating income of 652 million yuan, up 33.95% year on year, net profit from mother of 44 million yuan, up 147.36% year on year.
Incident reviews
In 2023, benefiting from the recovery in demand for terminals in the market, the company's sales scale reached a record high. For the full year of 2023, the company achieved revenue of 2,481 billion yuan, a year-on-year increase of 22.30%, and achieved revenue of 652 million yuan in a single quarter in Q4, an increase of 33.95% over the previous year. The main reason is the recovery in demand for terminals in the market in 2023. The company's production capacity was released, and high-end products represented by backlighting, high light efficiency, mini LED, and silver mirror flip products were booming. In 2023, the company's LED chip production capacity was 2.08 million pieces/year, up 8.1% year-on-year, with a capacity utilization rate of 98.45% and a production and sales rate of 100.96%, which remained high in the industry.
The company's profitability increased, and net profit for the whole year turned a loss into a profit. In 2023, the company's net profit to mother was 121 million yuan, an increase of 291.41% over the previous year, turning a loss into a profit. The company's gross margin was 10.44%, up 1.33 pcts year on year. Among them, the gross margin of LED chips and epitaxial films was 18.21%, up 3.92 pcts year on year. Although the industry competition was fierce in 2023, the unit price of the company's LED chips fell 2.8% year on year to 57.51 yuan/piece, but the reduction in raw material prices and the company's size effect highlighted the decline in product unit costs and an increase in gross margin.
The company's net interest rate in 2023 was 4.88%, up 8.01 pcts year on year. The main reason was that the company insisted on fine management, production efficiency continued to improve, and expenditure control was effective. Under cost reduction and efficiency, the company's 2023 sales expense rate/management fee rate/R&D expense rate/financial expense ratio were 0.61%/1.94%/5.21%/-1.67%, respectively, down 0.17pct/0.39pct/1.36pcts/1.87pcts, respectively.
Implement lean production, continue to release high-end products, and open up new profit space. The recovery in terminal demand is speeding up inventory clearance of LED chips, compounding the iteration of industry technology and the continuous expansion of application fields. The trend of high-end LED chips is obvious, and downstream consumer demand is upgrading from basic needs to quality. In the future, the company will further implement the layout on the Mini LED segment circuit, optimize the product structure, broaden the high-end market, and build a complete product system. The “High Efficiency LED Chip Production Expansion and Upgrade Project” and the “Mini/Micro LED Chip R&D and Manufacturing Expansion Project with an annual output of 7.2 million pieces” will ensure the continuous release of high-end products represented by Mini LED, automotive lighting, high-quality lighting, plant lighting, mobile phone backlighting, and screen displays to cultivate new profit growth points for the company. At the same time, the company will also implement lean production, maintain existing and additional production capacity and continue to be at full production and full sales, emphasize cost reduction and efficiency of key raw and auxiliary materials, and further open up the company's profit margin.
Investment advice
The company's net profit for 2024-2026 is estimated to be 1.92/2.60/348 million yuan, up 58.9%/35.1%/33.7% year on year, corresponding EPS of 0.29/0.39/0.52 yuan, PE 36.1/26.8/20.0 times, maintaining the “buy-A” rating.
Risk warning
Market demand falls short of expectations; company capacity expansion falls short of expectations; risk of industry technology renewal; risk of increased market competition; risk of falling product market prices.