Crystallization Releases 2023 Earnings Forecast, Small-Size DDIC and CIS Drive Q4 Performance Improves Month-on-Month
Crystal Integration released its 2023 performance forecast. In 2023, it is expected to achieve revenue of 70.6 to 7.41 billion yuan, a year-on-year decrease of 26.25% to 29.76%; in 2023, it is expected to achieve net profit of 170 to 255 million yuan, a year-on-year decrease of 91.63% to 94.42%. The second half of 2023 was accompanied by a recovery in consumer electronics demand. In particular, domestic demand for small-sized smartphones drove the growth of TDDI and CIS orders, and the company's capacity utilization rate continued to recover. The median revenue for Q4 was $2.22 billion, up 42.42% year on year, up 8.42% month on month; the median net profit for Q4 was 180 million yuan, up 138.77% month on month, but it was lower than our previous expectations due to increased financial and R&D expenses. We believe that the price of large LCD driver chips may be under pressure in the short term, and financial and R&D expenses will increase. We lowered our 2023/2024/2025 net profit forecast by 60%/33%/20% to 2.16/8.60/1,191 billion yuan. Give 1.5x 2024 PB (consistent with Huahong Company with similar revenue and product structure), adjust the target price to $18.45, and maintain the purchase rating.
4Q23 review: Full capacity drives Q4 revenue growth, and cost increases suppress profit growth. We expect the company's Q4 production capacity to increase to 117 kwpm (+2k qoq, equivalent to 12 inches). Due to the recovery in domestic demand for small-sized smartphones in the second half of 23, major customers continued to increase their ability to pull goods for TDDI chips, CIS and other chips, and the Q4 capacity utilization rate was close to full load. Thanks to this, we expect the company's Q4 gross margin to increase to 27.52%, an increase of 8.32pct over the previous month. However, due to the increase in financial expenses due to fluctuations in foreign exchange and the company's increased investment in R&D to develop new technology, the company's expense ratio increased during the Q4 period. The company's median Q4 profit was 180 million yuan, an increase of 138.77% over the previous year, but the year-on-year pressure was on.
2024 outlook: OLED demand is expected to remain strong. Focus on the company's 40/28nm production capacity release pace and outlook 2024. Judging from demand, we expect the overall demand for downstream large-size panels to fluctuate, but thanks to the increasing penetration rate of OLED in small and medium-sized products, OLED demand is expected to remain strong throughout the year. The company conforms to market trends and actively expands advanced production capacity (55/40/28nm). We expect production capacity to increase to 147 kwpm (equivalent to 12 inches) by the end of 24, and the overall capacity utilization rate is expected to increase throughout the year. However, due to fluctuations in demand for traditional large-size LCD panels, we think the company's 2024 ASP may be under pressure. Overall, we expect the company's revenue for the full year of '24 to grow to 9.179 billion yuan, up about 26% year on year; gross margin is expected to grow to 24.27%, up about 2.89pct year on year.
Adjust the target price to $18.45 and maintain the “Buy” rating
Since short-term ASP may be pressured by the price of large LCD driver chips, we lowered our 2023/2024/2025 net profit forecast by 60%/33%/20% to 2.16/8.60/1,191 million yuan, and the corresponding EPS is 0.11/0.43/0.59 yuan. Give 1.5x 2024 PB (consistent with Huahong Company with similar revenue and product structure), adjust the target price to 18.45 yuan (previous value 28.56 yuan), and maintain the “buy” rating.
Risk warning: The semiconductor cycle is declining; competition for mature manufacturing processes is intensifying; the risk that the development of OLED and other process platforms falls short of expectations.