Matters:
Company announcement: On February 23, 2024, the company released the 2023 performance report. The announcement shows that in 2023, the company achieved operating income of 1,835 million yuan, an increase of 19.20% year on year; realized net profit of 319 million yuan, an increase of 35.68% year on year; realized net profit without deduction of 309 million yuan, an increase of 39.32% year on year. Among them, Q4 2023 achieved operating income of 480 million yuan, an increase of 4.4% over the previous month, and realized net profit of 90 million yuan to mother, an increase of 35.6% over the previous month.
Guoxin Chemical's opinion: 1) The company is a leading domestic electronics circuit enterprise. The electronics industry has the advantages of high business stability and high barriers, providing a guarantee for the company's future revenue growth; 2) The company lays out electronic specialty gas products around the core screen business. The comprehensive layout of electronic gas products enhances the overall competitiveness of the company's products; 3) Helium resources are scarce and demand is high. The company has the largest and most complete helium import supply chain for domestic enterprises, and will continue to increase helium gas transportation capacity.
The company's electronic bulk gas circuit has strong stability and barriers, and the company has plenty of on-hand orders and strong certainty for future growth; according to the data disclosed in the company's 2023 performance report, we adjusted the company's 2023 revenue to be 1,835 billion yuan, net profit to mother of 319 million yuan, maintaining 2024-2025 revenue of 25.98/3.369 billion yuan, and net profit to mother for 2024-2025 of 41/540 million yuan. The current stock price corresponds to PE of 44/34/26x, maintaining the “increase” rating.
Commentary:
The results for the full year of 2023 exceeded expectations, consolidating the company's leading electronics circuit companies. According to the company's announcement, in 2023, the company achieved operating income of 1,835 million yuan, an increase of 19.20% year on year; realized net profit of 319 million yuan, an increase of 35.68% year on year; realized net profit without deduction of 309 million yuan, an increase of 39.32% year on year. Among them, Q4 2023 achieved revenue of 480 million yuan, an increase of 4.4% over the previous month, and realized net profit of 90 million yuan to mother, an increase of 35.6% over the previous month.
In terms of project progress, in 2023, several key projects such as Crystal Integrated A3, Huaxing Optoelectronics T9, Hefei Changxin Storage, Beijing Changxin Electric Collection, and Shanghai Dingtai Jiangxin will start supplying gas one after another; in 2024, projects such as Qingdao Xinen, Guangzhou Yuexin, and Fang Zhengwei will be put into operation one after another, laying a solid foundation for the company's continued growth in future performance.
Electronic specialty gas products are arranged around the core screen business to enhance the overall competitiveness of the product. The customer base of electronic bulk gas and electronic specialty gas is high. The company lays the brand foundation for the client through its advantageous business, Electronic Specialty Gas, and provides product endorsements for subsequent introduction of electronic specialty gas products, thus meeting the diverse needs of customers and enhancing the overall competitiveness of the company's products. Currently, the company is laying out an electron-grade high-purity hydrogen chloride project at Jinshan Chemical Park in Shanghai. It is preparing to build a 3,000 ton nitrous trifluoride project in Chifeng, Inner Mongolia, and is carrying out a hexafluorobutadiene project in Qianjiang, Hubei, covering the entire process from synthesis to purification. Currently, the projects are all in the construction stage. Furthermore, in the Hefei Electronic Chemicals Zone, the company cooperated with the Hefei Economic and Technological Development Zone to invest in the construction of a 390 million yuan electronic special gas project. It is expected to start construction in March 2024 and be completed and put into operation in December 2025. After the entire project is delivered, it is expected to produce 300 tons of electron-grade hydrogen bromide, 20,000 bottles of alkane mixed gas, 1,438 tons of high-purity hydrogen, and 35.71 tons of high-purity helium per year.
Helium resources are scarce and in high demand. The company has the largest and most complete helium import supply chain for domestic companies, and will continue to increase helium gas capacity. It is the only domestic gas company in China that also has long-term, high-volume, multi-source helium procurement resources. Since entering the global helium supply chain system in 2020, the company has actively built autonomous and controllable capabilities throughout the supply chain. In the upstream gas supply chain, the company is continuously developing new Changxie gas sources, striving to independently develop more international supply channels and obtain more first-hand helium gas sources. The company has now directly signed long-term procurement agreements with gas source manufacturers such as the United States and Russia. It is estimated that in 2025, the company's self-developed gas source procurement will account for 64%, which will exceed the amount of gas removed from Linde Gas. The risk of extreme events is controlled through diverse gas source combinations to ensure the continued growth of the company's helium business revenue.
In 2021, the company's new electronics production line won the bid for rapid growth in production capacity. In order to meet rapidly growing customer demand and ensure the continuous stable supply of helium, the company purchased liquid helium cold boxes in batches in 2021 and 2022. By the end of 2022, the company had purchased and put into operation 25 liquid helium cold boxes. It is expected to have more than 40 liquid helium cold boxes by the end of 2023, increasing the capacity by about 1 times the previous year; by the end of 2025, it is expected to reach 100 liquid helium cold boxes, further doubling the capacity. Each liquid helium refrigerator rotates at a frequency of about 3.5 times per year. The company is expected to have a helium capacity level of about 4.5 million m3/year in 2024, and a capacity of 8 to 9 million m3/year in 2025. In line with the company's rapid expansion of first-hand helium sources, the company will become the largest domestic helium importer at that time.
Investment advice:
The company's electronic bulk gas circuit has strong stability and barriers, and the company has plenty of on-hand orders and strong certainty for future growth; according to the data disclosed in the company's 2023 performance report, we adjusted the company's 2023 revenue to be 1,835 billion yuan, net profit to mother of 319 million yuan, maintaining 2024-2025 revenue of 25.98/3.369 billion yuan, and net profit to mother for 2024-2025 of 41/540 million yuan. The current stock price corresponds to PE of 44/34/26x, maintaining the “increase” rating.
Risk warning
The risk that the price of helium will fall; the risk that customer's ability to fulfill contracts will deteriorate; the risk that downstream capital expenditure will slow down and new orders will fall short of expectations; the risk that gas supply will not progress as expected when existing orders are put into production.