Event: On the evening of February 22, 2024, the company released the 2023 annual performance report. In 2023, the company expects to achieve total operating income of 710 million yuan, +7.5% year-on-year, achieve net profit of 170 million yuan, -7.6% year-on-year, and achieve net profit without deduction of 150 million yuan, or +0.2% year-on-year. According to the performance report data, the company achieved operating income of 200 million yuan in the fourth quarter, +15.3% year on year, realized net profit of 49.16 million yuan, -13.7% year on year, and realized net profit without deduction of 42.71 million yuan, or +32.6% year on year.
Q4 Revenue continued to grow well, and overall business performance remained steady. Under the steady recovery of 23H2 demand, the company gradually emerged from the adverse effects of the first half of the year. At the same time, by optimizing the product structure, the proportion of high-end products was further increased, and revenue growth was promoted throughout the year. On a quarterly basis, the company's 23Q3 revenue had already hit a new quarterly revenue high. This time, the 23Q4 revenue side still achieved a 2.1% quarter-on-quarter increase, reflecting that downstream demand recovery continues to maintain a good momentum, and is also expected to further consolidate the growth momentum in the new year. Judging from the performance, the slight decline in the company's performance throughout the year was mainly dragged down by weak demand for 23H1, but overall there was a recovery trend. Looking at a single quarter, the net profit of the 23Q4 company declined slightly from Q3, but the overall profit level was still relatively good. We judge that it may be related to factors such as the rise in natural gas prices during the reporting period (23Q4, the Chinese LNG market price increased 29.8% month-on-month in Q3), as well as the increase in various expenses and a decrease in exchange earnings.
Under the AI wave, industry trends are determined, and high-quality assets welcome good layout opportunities. Previously, the upstream materials for electronic semiconductors faced drastic adjustments, but the downward valuation provided a rare allocation opportunity for high-quality asset allocation. We expect the company's operations to continue to improve in 2024, and from the perspective of the industry and company: 1) Steady growth in industry demand: EMC is driven by AI and advanced packaging and supported by the recovery in consumer electronics demand; 2) Good industry pattern: years of accumulation have helped the company achieve a leading edge in the global supply chain and compete directly with Japanese companies; 3) Scarcity in the industrial chain: the company's high-end products are such as TOP Spherical silicon below cut20um and lowα spherical aluminum have been supplied in batches in fields such as HBM, and are expected to become the most beneficial targets in the AI industry trend.
Profit forecasting and investment advice: The company has advantages such as product sequence/technology/service, breaking overseas monopolies, and covering almost all core customers. Future products will fully benefit from the recovery of consumer electronics. Spherical silicon and spherical aluminum (such as HBM related) for advanced packaging have all laid the foundation for future volume, and spherical aluminum for thermal conductivity is also expected to bring about a second growth curve. Short-term catalysis or reflection of overseas technology is a broad growth opportunity brought about by high-end functional fillers in the long term under the wave of industrial trends. According to the company's latest performance report data, we adjusted the profit forecast. The company's net profit for 23-25 is estimated to be 1.7, 250, and 310 million yuan (the previous forecast was 180, 250, and 310 million yuan), corresponding to PE of 44, 31, and 24 times, maintaining a “buy” rating.
Risk warning: Market competition intensifies, downstream demand falls short of expectations, production capacity investment progress falls short of expectations, new business development falls short of expectations, raw materials and energy prices fluctuate greatly, and the risk of exchange rate changes.