Incident: The company released its 2023 performance report. During the reporting period, it achieved operating income of 712 million yuan, a year-on-year increase of 7.51%, and net profit of 174 million yuan, a year-on-year decrease of 7.57%, after deducting non-net profit of 150 million yuan, an increase of 0.21%; of these, the fourth quarter achieved operating income of 210 million yuan, an increase of 15.33%, 2.07% year-on-month, and a year-on-year increase of 32.64%, a year-on-year decrease of 6.13%.
Actively promote the transformation and upgrading of the product structure, and the proportion of high-end products has increased. During the reporting period, in the face of a business environment such as weak demand in the global terminal market in the first half of the year and a steady recovery in downstream demand in the second half of the year, the company actively promoted product structure transformation and upgrading, and the share of high-end products increased. At the same time, the company's net profit declined year-on-year due to factors such as increased R&D expenses, reduced exchange earnings, and increased depreciation expenses. The company focuses on advanced downstream technologies such as high-end chip (AI, 5G, HPC, etc.) packaging, heterogeneous integrated advanced packaging (Chiplet, HBM, etc.), next-generation high-frequency high-speed copper-clad plates (M7, M8, etc.), high thermal conductivity interface materials for new energy vehicles, advanced millimeter wave radar, and photovoltaic cell adhesives, etc., and continues to launch various low-CUT point Lowα micron/submicron spherical silicon powder, spherical alumina powder, low-loss/ultra-low loss spherical silicon powder for high frequency copper clad plates, etc. High thermal conductivity micron/submicron spherical alumina powder for new energy batteries.
New production capacity has been put into operation one after another to establish growth, and new projects meet higher end demand. The company keeps an eye on changes in downstream fields such as electronic circuit boards, EMC, LMC, UF, thermal interface materials, etc., and continuously optimizes the product structure. The production line for the 9,500 ton electronic-grade new functional material project continues to be released, and the operating rate of the 15,000 ton spherical powder project for high-end chip packaging continues to increase, enhancing the company's growth. The company plans to invest 128 million yuan to build an electronic-grade functional powder material project for integrated circuits, with a design capacity of 25,200 tons/year, and a construction period of 24 months. The completion of the project will continue to meet the increasingly higher characteristic requirements of electronic grade functional powder materials for integrated circuits in application fields such as high-frequency high-speed substrates for 5G communications, IC carrier boards, high-end chip packaging, etc., and further enhance the company's automated intelligent manufacturing level and production efficiency.
There is plenty of room for domestic replacement of spherical silicon powder, and the prospects for developing new products are broad. Japanese companies occupy 70% of the global spherical silicon powder market. Japan's Yadoma has a monopoly on the spherical silicon powder filler market below 1 micron, and there is plenty of room for domestic replacement. The development of the AI industry drives HBM emissions, which will cause problems of increased packaging height and high heat dissipation requirements. Granular packaging materials (GMC) require the addition of spherical silicon below TOP CUT 20um and Lowα spherical aluminum. Some of the company's customers are world-renowned GMC suppliers, supplying spherical silicon and low α spherical aluminum used in HBM packaging materials GMC. The company strengthens research and development of functional powder materials such as high-performance spherical titanium dioxide and advanced nitride powders, and has good development prospects.
Maintain a “Highly Recommended” investment rating. The company's net profit from 2024 to 2025 is estimated to be 226 million yuan and 282 million yuan respectively, and EPS is 1.21 and 1.52 yuan, respectively. The current stock price corresponds to PE 36 and 29 times, respectively, maintaining a “highly recommended” rating.
Risk warning: Energy costs are rising, new projects are being put into production below expectations, and downstream demand falls short of expectations.