The company released the 2023 performance report, and the performance was basically in line with expectations. During the reporting period, the company achieved revenue of 1500 billion yuan (YoY -16.80%), realized net profit of 165 million yuan (YoY -20%), and realized net profit of 150 million yuan (YoY -23%) after deduction. The company's revenue and profit declined year-on-year in 2023. The main reasons: 1) the price and profit level of rare gas products declined; 2) the company's product sales fell short of expectations due to downstream inventory removal and reduced operating rate; 3) interest expenses caused by the issuance of convertible bonds. Among them, 23Q4 achieved revenue of 371 million yuan (YoY -7.30%, QoQ +4.53%), realized net profit of 43 million yuan (YoY +113.30%, QoQ -8.36%), and realized net profit of 41 million yuan (YoY +94.43%, QoQ -7.98%) in a single quarter.
The full-year results were under year-on-year pressure, and 23H2 profit margin optimization paid off. During the reporting period, 1) the price of rare gas raw materials returned to normal levels, leading to a significant decline in the sales price and profitability of the company's rare gas products; 2) poor demand for consumer electronics and the decline in the operating rate of downstream semiconductor factories, causing sales of the company's products to fall short of expectations (such as germanium supplied to Samsung); 3) individual product sales fell short of expectations due to unstable helium gas sources; 4) additional interest charges after the issuance of convertible bonds was completed. Multiple factors led to a year-on-year decline in the company's revenue and profit. Since the second half of 2023, in order to maintain the company's fundamentals and optimize the company's gross profit margin, the company abandoned some low-margin products and raised the export prices of some fluorocarbon products. The combined effects of multiple measures were obvious, and profitability was gradually restored. Looking ahead, with the steady increase in the utilization rate of downstream fab customers, the company's new products and production capacity such as germanium, ethysilane, and perfluorobutadiene are added one after another, and the company's performance is expected to improve quarterly.
The high-end application field continues to break through, and the layout of new projects is progressing in an orderly manner, and I am optimistic about the company's continued growth. The company adheres to a variety of specialty gas development strategies, with high-end products as the main focus. Currently, the downstream has basically covered domestic 12-inch fabs. More than 15 products have been supplied with 14nm advanced technology in batches, more than 10 products have been supplied to 7nm advanced technology, 2 products have entered the 5nm advanced process, and the self-developed product germanium in the entire industry chain has been released in Samsung's 5nm process production line.
In terms of project construction, the infrastructure for the Jiangxi IPO fundraising project was completed and production capacity was released in an orderly manner; in March 2023, the company completed the issuance of convertible bonds to build a semiconductor material project with an annual output of 1,764 tons in Jiujiang, Jiangxi; in addition, the company had project construction plans in Zigong, Sichuan and Rudong, Jiangsu, and the regional strategic layout was continuously improved. On October 26, 2023, the company announced that it intends to sign the “Walt Semiconductor Materials R&D Headquarters Project Investment Agreement” with the People's Government of Sanjiao Town, Zhongshan City, Guangdong Province, to invest 800 million yuan to build a semiconductor gas R&D and production center. The implementation of the project will help relieve some of the pressure on production capacity at the Foshan headquarters and lay a solid foundation for the company's future development in Guangdong.
Investment analysis opinion: According to the 2023 performance report, the company's 2023 net profit was lowered to 165 million yuan (original value was 200 million yuan). Considering the company's new production capacity introduction and climbing cycle, as well as factors such as R&D investment and convertible bond expenses, etc., the net profit forecast for 2024-2025 was reduced to 2.33 million yuan and 324 million yuan (original values were 287 million yuan and 386 million yuan). The PE corresponding to the current market value is 36, 25, and 18X, respectively. As downstream demand recovers one after another, the performance is expected to grow quarterly Improve and maintain the “gain” rating.
Risk warning: 1) Downstream demand falls short of expectations; 2) Project progress and product introduction fall short of expectations; 3) Prices of raw materials have risen sharply.