Revenue grew steadily in 2023, optimistic about the company's three major business layouts, and maintained a “buy” rating

On February 28, 2024, the company released the 2023 performance report. In 2023, the company achieved revenue of 2,576 billion yuan, +10.80% year on year; net profit to mother of 232 million yuan, -12.08% year on year; deducted non-net profit of 159 million yuan, -24.60% year on year. In the 2023Q4 single quarter, revenue was 725 million yuan, +13.46% year over month; net profit to mother was 0.39 million yuan, -7.73% year on month, -3.55% month on month; after deducting non-net profit of 0.19 million yuan, -40.99% year on year and -54.79% month on month. The decline in profits in 2023 is mainly due to factors such as increased production expansion costs for new projects, changes in product sales structure, and increased new product development and trial production. According to the company's performance report guidelines, we slightly downgraded the company's performance. We expect net profit to be 2.32/3.54/463 million yuan in 2023-2025 (previous value was 2.31/3.54 billion yuan), corresponding EPS was 0.88/1.33/1.74 yuan (previous value was 0.87/1.34/1.74 yuan), and the current stock price corresponding PE is 53.8/35.3/27.0 times. We continue to be optimistic about the long-term growth space for the company's targets, components and third-generation semiconductor materials to maintain “purchase” ratings.

Focus on main business and continuously improve core competitiveness

First, in terms of products, the company independently developed key manufacturing equipment for target materials, established a relatively complete independent intellectual property protection system, and improved the layout of semiconductor precision components and third-generation semiconductor key materials while striving to expand the market share of high-purity sputtering targets. Second, in terms of projects, the company actively promotes the construction of related projects to enhance the company's overall profitability. In 2023, the holding subsidiary has built and completed the first domestic production line for third-generation semiconductor power device module core materials with the world's advanced level and autonomous design, and the product has been initially recognized by the market. The Korean base has also been registered to help the company develop the international market and increase the market share and international competitiveness of the company's products.

Continue to increase investment in R&D, grow rapidly in the parts business, and create a new growth pole

The company attaches importance to R&D, and the 2023Q1-Q3 R&D cost rate has reached 6.26%. Continuous research and development has accelerated the industrialization of the company's projects, and the industrialization project for ultra-pure metal sputtering targets for ultra-high purity metal with an annual output of 70,000 ultra-large-scale integrated circuits continues to advance. At the same time, the company continues to improve the business layout related to semiconductor precision components. The 2023Q3 parts business achieved revenue of 168 million yuan, +39.87% month-on-month, which is expected to become a new growth pole driving the company's performance.

Risk warning: downstream demand falls short of expectations; technology development falls short of expectations; customer acquisition falls short of expectations.