23Q4 revenue for the single quarter was +2.08% month-on-month, in line with expectations. Net profit declined due to increases in natural gas prices.
The company's performance report announced 2023 revenue of 712 million yuan, up 7.51% year on year, net profit to mother of 174 million yuan, down 7.57% year on year, net profit after deducting 150 million yuan, up 0.21% year on year. The year-on-year increase in revenue benefited from the steady recovery of 23H2 downstream demand and the increase in the share of the company's high-end products. The year-on-year decline in net profit was mainly affected by increased R&D expenses, reduced exchange earnings, and increased depreciation expenses.
The estimated 23Q4 revenue for a single quarter was 210 million yuan, up 2.08% month-on-month, and net profit to mother was 49 million yuan, down 5.09% month-on-month, net profit after deducting non-return net profit of 43 million yuan, down 6.13% month-on-month, after deducting non-net interest rate 21.27%, down 1.86% month-on-month. As the price of liquefied natural gas (one of the driving forces required for production) in China increased 29.81% month-on-month in 23Q4, gross margin is expected to decline month-on-month in 23Q4, which in turn affects profits.
LOW A spherical silicon and spherical aluminum products have been supplied in batches, and it is expected to take advantage of the HBM packaging materials industry.
The largest product, spherical inorganic powder, had 22-year revenue of 354 million yuan, accounting for 53.5% of total revenue, with a gross profit margin of 43.05%; the second-largest product, angular inorganic powder, had 22-year revenue of 232 million yuan, accounting for 35.0% of total revenue, with a gross profit margin of 35.41%. Spherical inorganic powders accounted for more than 60% of revenue in the first three quarters of 2023.
On January 22, 2024, the company stated on the Shanghai e-interactive platform that some of its packaging material customers are world-renowned companies in Japan, South Korea and other places, and that they have supplied LOW a ball silicon and low a ball aluminum products in batches. This product is the product required for the HBM packaging material GMC. According to Gartner's forecast, the global HBM market will increase from US$1.1 billion to US$5.2 billion from 2022 to 2027, and the CAGR will reach 36% from 2022 to 2027. As a supplier of HBM-related packaging materials, the company is expected to take advantage of the industry trend.
It is proposed to build an R&D center for advanced functional powder materials for ICs to embrace the new development of 5G/AI/HPC.
On February 19, 2024, the company announced that it plans to build an R&D center for advanced functional powder materials for ICs and work with the Lianyungang High-tech Industrial Development Zone Management Committee to jointly build an industrial innovation platform. At the same time, we will accelerate the construction of a provincial innovation consortium platform for the “Jiangsu High Performance Spherical Silicon Powder Industry Technology Innovation Consortium”. As 5G/AI/HPC and the like promote the development of high-frequency high-speed substrates/IC carrier boards/high-end chip packaging, etc., electronic-grade functional powder materials for integrated circuits have ushered in new opportunities, and the company will grow further with the construction of R&D centers.
Leading domestic functional powder materials companies welcomed the explosion of advanced packaging and maintained an “gain” rating.
According to Yole's forecast, the global advanced packaging market will reach 78.6 billion US dollars in 2028, and the CAGR will reach 10.6% in 22-28. As a leading supplier of functional powder materials in China, the company is expected to benefit as a priority. Net profit from 2023 to 2025 is expected to be 1.774/2.52/317 million yuan respectively, corresponding to PE 61.8/42.7/34.0 times in 23/24/25, maintaining the “gain” rating.
Risk warning: macro-environmental risk; business risk; risk of R&D falling short of expectations; risk of losing core technical personnel, etc.