Incidents:
The company released its 2023 performance report. In 2023, the company achieved revenue of 517 million yuan, an increase of 12.73% year on year; realized net profit of 123 million yuan, an increase of 8.88% year on year; realized net profit after deduction of 76.13 million yuan, a year-on-year decrease of 4.53%. With 2023Q4, the company achieved revenue of 103 million yuan in a single quarter, up 56.45% year on year and 18.45% month on month; realized net profit of 25.35 million yuan, up 2196% year on year, and 9783% month on month.
Comment:
OLED materials revenue grew quarterly, and the 2023 results were in line with expectations. Considering the introduction and release of the company's OLED material products in clients and the pace of confirmation of orders in the company's equipment business, we believe that 23Q4's revenue structure in a single quarter is still dominated by OLED materials. It is estimated that 23Q4's OLED material revenue will be about 100 million yuan, up 60.9% year on year and 24.8% month on month. As a result, the company achieved quarter-on-quarter growth in OLED material revenue Q1-Q4 in 2023. Based on this, we expect the company's materials business revenue for the full year of '23 to be about 322 million yuan, an increase of 51.5% over the previous year. However, due to the company's multiple R&D projects currently progressing at the same time, compounding the increase in the number of employees after the new Jinshan plant in Shanghai was put into operation in 2023, the company's R&D expenses and management expenses increased significantly in 2023, which in turn had a temporary impact on the company's current net interest rate. We believe that with the subsequent increase in the company's revenue due to the company's new production capacity and release of new products, plus the company's optimal management of ongoing research projects and management expenses, the company's overall cost ratio is expected to decrease and enhance the company's profitability.
OLED materials have been successfully introduced, and it is planned to further expand the material supply capacity. In terms of product introduction, the company's G' and R' materials have completed the introduction of the customer iterative system; B' materials have entered the short list of new systems and are expected to be introduced. In addition, the company's packaging material products have been stably supplied to production lines, and PDL materials have passed mass production tests by some customers.
In terms of supply capacity, the company's “R&D project for high-performance light-emitting materials and AMOLED light-emitting materials with an annual output of 10,000 kg per year” was officially completed in 2023, and the company's production capacity of finished OLED materials increased to 15 tons/year.
The company plans to invest no less than 680 million yuan to build a new base in Beihu District of Changchun City to improve the integrated layout of the company's R&D and industrialization projects for using key functional materials for OLED displays.
We continue to receive orders for evaporation source equipment and actively promote the development of products such as higher generation evaporation sources. As of September 2023, the company's current equipment orders were 166 million yuan. At the same time, the company's subsidiary Shanghai Shengyi won the bid for Chongqing BOE's sixth-generation AMOLED laminated transformation project at the end of September 2023, and won the bid for Mianyang BOE's 6th generation AMOLED (flexible) production line project in January 2024. Among them, the total order amount for the Chongqing BOE project is about 45.2 million yuan (no contract has been signed as of the end of September 2023). In terms of high-generation evaporation source products, BOE announced at the end of November 2023 that it plans to invest 63 billion yuan to build an 8.6th generation AMOLED production line project in Gaoxi West District of Chengdu, with a design capacity of 32,000 pieces/month. The project will be built in two phases in stages, with a total construction period of about 34 months. The company has been working with leading domestic OLED panel companies to develop larger G8.5/G8.6 high-generation linear evaporation sources, and related testing and production platforms are also in the process of being built. Under the trend of domestic high-generation OLED production line construction, the company, as the leading domestic linear evaporation source, will clearly benefit.
Profit forecast, valuation and ratings: The company achieved significant growth in OLED materials in 2023, and the company's performance was in line with expectations.
However, considering that the company's current R&D investment is still high, we lowered the company's profit forecast for 23-25. We expect the company's net profit to be 1.23 (down 7.5%)/2.04 (down 16.7%)/3.29 billion yuan (down 16.1%) for 23-25, respectively. We continue to be optimistic about the company's subsequent development as a leader in the domestic OLED organic materials and OLED evaporation equipment industry, and maintain a “buy” rating.
Risk warning: New product introduction risk, OLED material release falls short of expectations, product development risk.