occurrences
On February 22, the company announced its 2023 annual results report. It is expected to achieve revenue of 144.5047 million yuan, -73.20% year over year; realized net profit attributable to mother of 63.2712 million yuan, -140.01% year on year; realized net profit deducted from non-mother - 66.68 million yuan, -143.08% year on year.
Key points of investment
The cyclical weakening of the economy put pressure on performance in the short term. The company expects to achieve revenue of 144.5047 million yuan in 2023, -73.20%; net profit to mother of 63.2712 million yuan, -140.01% year over year; net profit withheld from mother - 666.68 million yuan, -143.08% year over year, mainly due to the impact of the industry cycle and global economic environment. In 2023, the company's large diameter silicon materials business revenue declined sharply year on year, and capacity utilization declined. At the same time, during the 2023 reporting period, inventory price reduction was calculated. In addition, the company's silicon parts and silicon wafer business is currently in the market development period, and the performance contribution is in its infancy. Among them, preparations for silicon wafer inventory impairment in 2023 have put pressure on net profit returned to mother. In the future, the company will overcome the adverse effects of industry fluctuations and other factors, actively seize opportunities, continuously optimize the product structure, steadily expand production scale, achieve a world-leading competitive advantage by improving many key technical indicators, and meet the strict requirements of customers for quality.
Buck the trend and expand production while the cycle recovers to unleash performance elasticity. According to the company's additional announcement on October 13, 2023, the company raised 296 million yuan in net capital. After implementation of the project, it will create an additional production capacity of 393,136 kg (equivalent to 1,145,710 mm) of silicon materials for etching per year. The project construction period is 24 months. The downstream demand for the company's large-diameter silicon materials and processed products, that is, silicon component products, is closely related to the capacity utilization rate and additional production capacity of end-user integrated circuit manufacturers. In terms of capacity utilization, there is a slow upward trend in the capacity utilization rate of mainstream foundry companies; in terms of production capacity, SEMI expects global semiconductor monthly wafer (WPM) production capacity to grow 6.4% in 2024 after increasing 5.5% to 29.6 million sheets in 2023 (calculated in 200mm equivalent). The bottom of the current cycle is expected to reach an inflection point. In the future, the company will optimize the product structure according to downstream market demand, further increase the proportion of large diameter products of 16 inches and above with high gross margins, and actively expand the polysilicon material product business for etching to improve profitability.
Investment advice
We expect the company to achieve revenue of 145/226/607 million yuan in 2023/2024/2025, respectively, and net profit of 0.63/0.07/163 million yuan respectively. Considering inventory price reduction preparations and fund-raising depreciation, etc., we expect that the company's 2024 performance is expected to recover. The current stock price is 23 times the 2025 PE, covered for the first time, giving it a “buy” rating.
Risk warning
Customer concentration risk, supplier concentration risk, raw material price fluctuation risk, business fluctuation and decline risk, market development and competition risk, industry risk, macro-environmental risk, capital raising investment project construction risk, and additional depreciation and amortization risk affecting the company's profitability.