Investment summary
Incident Overview
On the evening of February 23, the company disclosed its 2023 performance report. The company's revenue in 2023 was 1,238 million yuan (+31.78%), net profit to mother was 196 million yuan (+10.47% year over year); 2023Q4 single quarter company revenue was 343 million yuan (+42.00% year on year, +1.42% month on month), and net profit to mother was 54 million yuan (+53.86% year over month, -10.53% month on month).
Analysis and judgment
The boom in some parts of the DDIC industry chain is gradually recovering. In terms of terminal demand, 24M1 global large-size LCD TV panel shipments were +10.7%, the highest increase in nearly 13 months; IDC expects global smartphone shipments to be +2.8% year-on-year in 2024; Canalys indicates that leading manufacturers such as OEMs, processor manufacturers, and operating system suppliers will intensively launch new models with AI capabilities in 2024, which is expected to boost demand for PC switches. Looking at the foundry process, Jinghe said in the announcement that since 23Q2, the downstream inventory removal situation has achieved certain results, market demand has begun to pick up, and capacity utilization and gross margin are recovering in 2023. The 24Q1 revenue growth rate is expected to be between 90% and 111% year-on-year. We believe that the recovery in the DDIC industry's boom is expected to boost orders at the end of the closed test line. At the same time, the 24Q1 company's capacity utilization rate maintained a year-on-year growth trend. We believe this situation may continue, and the company's gross margin is expected to remain steady.
The Hefei production base fund-raising project has been gradually implemented, and we will continue to monitor the progress of the company's production capacity enhancement+structural optimization. The company's convertible bond plan was approved by the board of directors in June 2023. Currently, the company has used its own or self-raised capital to lock in advance the delivery of equipment related to the fund-raising project, the 12-inch advanced process new display driver chip wafer gold bump manufacturing and wafer test expansion project, and the 12-inch advanced process new display driver chip wafer test and chip packaging capacity expansion project, which is expected to be gradually released from the first half of 2024. Furthermore, at present, the OLED display driver chip market demand is growing rapidly, and the added value of the 12-inch OLED business is high, so we believe that the OLED market is expected to become a key investment area for the company. According to the company's forecast, the share of revenue in the OLED product sealing and testing business is expected to continue to grow in 2024.
The company's share buyback shows confidence in the future market. Based on confidence in the company's future development prospects and recognition of the company's long-term value, the company actively initiated a repurchase plan. As of February 29, the company had repurchased more than 10 million shares, accounting for about 1.25% of the company's total share capital.
Investment advice
Maintain a “buy” rating. Benefiting from factors such as the continuous increase in the company's production capacity and the optimization of the company's product structure, we adjusted the company's net profit forecast for 2023-2025 to 1,96/2.47/301 million yuan, corresponding to PE of 39/31/25 times, respectively.
Risk warning
Downstream demand fell short of expectations, market competition intensified, and international trade frictions intensified.