Incidents:
The company released its 2023 performance report. In 2023, the company achieved operating income of 2,481 billion yuan, a year-on-year increase of 22.30%; net profit to mother was 121 million yuan, after deducting net profit of non-return to mother of 122 million yuan, turning a year-on-year loss into a profit.
Performance & production capacity have been steadily improved, and the results of cost reduction and efficiency are obvious
In 2023, the company achieved steady growth or improvement on both the revenue side and the cost side, while the cost side continued to be optimized and the profit side gradually recovered. In 2023, the company's LED chip performance and production capacity improved, the product structure continued to be high-end, and production capacity grew steadily. The company achieved annual revenue of 2,481 billion yuan, up 22.30% year on year; gross margin was 10.44%, up 1.33 pct year on year; production capacity reached 22.08 million tablets, up 8.13% year on year; and production reached 21.74 million tablets, up 8.37% year on year. Benefiting from cost reduction and efficiency, the cost side declined steadily, and the net interest rate improved markedly year-on-year. The company's expense ratio for the 2023 period was 6.09%, down 3.78 pcts year on year; net interest rate was 4.88%, up 8.01 pct year on year.
The fixed increase has been completed. Mini/Micro LED is the next profit growth point. According to data from the China Commercial Industry Research Institute, the market size of China's Mini LED industry is close to 20 billion yuan in 2023, and the number of Mini LED products shipped is close to 20 million units. It is expected that the shipment volume will reach 49 million units in 2026. As the commercialization process of Mini LED backlights accelerates, consumer application products continue to emerge, supply chain costs are reduced, and demand in the display industry is bottoming out, Mini LED is expected to continue to penetrate. In 2023, the company's MiniLED progressed smoothly, and the fixed increase was successfully completed, raising capital of 1,082 million yuan. The fixed increase plan is to build an R&D and manufacturing expansion project for Mini/Micro LED chips with an annual output of 7.2 million pieces. After the completion of the fund-raising project, Mini LED chips are expected to have an average annual sales revenue of 1.13 billion yuan and an average annual profit of 150 million yuan, which is expected to become the company's next profit growth point.
Profit Forecasts, Valuations, and Ratings
Considering that industry demand is expected to bottom out, we expect the company's revenue in 2024-2026 to be 2,819/32.74/38.78 billion yuan, with year-on-year growth rates of 13.64%/16.12%/18.46% respectively; net profit to mother of 1.59/2.24/326 million, with year-on-year growth rates of 30.91%/41.36%/45.49%, respectively; EPS of 0.24/0.33/0.49 yuan/share, respectively, corresponding to 24-26 PE 36x/25x/ 17x Since the company is a leading domestic LED chip manufacturer and the business efficiency industry leader, it is recommended to keep an eye on it.
Risk warning: Downstream demand recovery falls short of expectations, LED chip price recovery falls short of expectations, mini/microLED chip industrialization falls short of expectations.