The company's revenue in 2023 grew steadily year on year, domestic demand continued to rise, and overseas revenue was under pressure; net interest rates for the full year of 2023 fell sharply year on year, mainly due to the effects of large-scale production lines not yet fully reflected, changes in product structure, and high cost calculation. Looking ahead to 2024, the company's revenue growth is expected to accelerate as the boom of foreign equipment manufacturers recovers and domestic equipment manufacturers sign orders marginally; with the successive commissioning of the Nantong plant, etc., the company's large-scale effect will gradually show, and the company's profit margin is expected to reach an inflection point and accelerate upward. The 2024 equity incentive plan (draft) also highlights confidence in profit growth in 2024-2025, and maintains the “increase” investment rating.
The company's revenue grew steadily year-on-year throughout 2023, completing the trigger value for the 2023 equity incentive revenue assessment.
According to the company's performance report, the company's revenue for 2023 is expected to be 2,066 billion yuan, up 33.8% year on year; 23Q4 revenue is expected to be 676 million yuan, +27% YoY/+20% month-on-month. The company benefited from increased domestic customer demand and high revenue growth for module products. Revenue for the full year of 2023 grew steadily year-on-year, completing the revenue trigger value of 2 billion yuan set in the 2023 equity incentive plan, but the revenue growth rate declined from 2022, mainly due to ① the year-on-year decline in sales in the global equipment industry in 2023, the overseas equipment boom was in a downward cycle, and overseas revenue was under pressure; ② some major domestic semiconductor equipment customers absorbed inventory, causing the growth rate of the parts business to slow down.
Affected by product structure, cost calculation, etc., the company's profit margin in 2023 was under year-on-year pressure. The company's net profit for 2023 is estimated to be $158 million, or -35.6% year on year; net profit after deducting non-net profit is expected to be 80 million yuan, or -55% year on year; 23Q4 net profit is expected to be 0.26 million yuan, -68.2% YoY/-28% month on month; 23Q4 net profit is expected to be 43 million yuan, -21% year over year. The company's deducted non-net interest rate in 2022 reached 11.5%. Since 2023, the deducted non-net interest rate for a single quarter has continued to be under pressure. The year-on-year deducted non-net interest rate was only 3.9%, which is clearly under year-on-year pressure, mainly due to ① the company's revenue share of module products with relatively low gross margin increased and decreased year-on-year; ② the revenue growth of component products that take up a lot of machinery and equipment fell short of expectations, and the company's early investment in machinery and equipment production pace was mismatched with industry sentiment. The scale effect was not reflected; ③ Affected by factors such as geography and overseas prosperity, the company's export revenue with relatively high gross margin increased year-on-year; ④ R&D investment, Furthermore, costs and period expenses have increased due to reasons such as reserving personnel for factories in many places. Long, for example, Zhengfan Technology's new semiconductor orders in 2023 increased 84% year-on-year. Yingjie Electric's total RF power orders in 2023 reached 100 million yuan, mostly from the semiconductor equipment side; however, due to the impact of major domestic customers going to inventory and Sino-US relations, etc., the signing of 2023 parts orders for Xinlai Yimai, etc. was delayed. Looking ahead to 2024, along with the continued expansion of production by leading domestic fab manufacturers, equipment procurement is expected to accelerate in 2024, domestic parts manufacturers are expected to usher in an accelerated order period; 3) Recent orders from domestic parts manufacturers are improving, and the outlook for 2024 is optimistic: Xinlai Yingcai and others indicate that domestic and foreign customer orders will improve from 23Q3, and market demand will gradually pick up; Fuchuang Precision is optimistic about the 2024/2025 revenue growth rate, according to the 2024/2025 equity incentive plan for 2024/2025 The trigger values were 2.8/40 billion yuan, up 35.5%/42.9% year on year, respectively; the revenue assessment target values were 36/4.5 billion yuan, respectively, up 74.2%/25% year on year.
Modular procurement is expected to become a future trend for domestic equipment manufacturers, and the company's module revenue is expected to continue its high growth trend in 2024. In the previous few years, domestic equipment manufacturers mainly designed around complete machines, and modular design capabilities were weak, so they mainly purchased parts; as domestic equipment manufacturers improve their modular design capabilities, demand for modular procurement is expected to continue to increase, and the gas cabinet (Gas-Box) product market will unleash huge growth. The company's products went from single-piece customization to modular optimization. Module products include gas cabinet modules, ion implanter modules, etched valve modules, transition chambers, and transmission chamber modules. Revenue from 23H1 modules and gas pipeline products increased 95% year-on-year, and the growth rate was significantly higher than the overall revenue growth rate of 38.6% of 23H1. The production capacity of the company's Nantong plant will be gradually released from 2024-2025. Of the design capacity of 2 billion yuan, process parts, structural components, module products, and gas pipelines are expected to be 2.8, 7.2, 8.4 and 160 million yuan respectively, with modular products accounting for the highest proportion. According to the company's guidelines, the revenue growth rate of module products in 2024 is expected to be higher than the growth rate of the parts business, and the share will continue to increase in the future.
The company's production capacity at home and abroad continues to expand, helping the company grow its long-term revenue. The company's old factory area on Feiyun Road in Shenyang is fully loaded, building new production lines in Nantong, Shenyang, and Beijing, and is also developing a global layout overseas in the US and Singapore. The company's production line in Nantong has an annual production capacity of 2 billion yuan, focusing on customers in southern China such as customer C, Kaishitong, Zhongwei, Jingsheng Electromechanical, etc., and is expected to start production in 2023 and is expected to reach production in 2025; the new plant in Shenyang has an annual production capacity of 500 million yuan, focusing on customer B and other customers in specialized fields, and guarantees the needs of local semiconductor equipment customers such as Tuojing Technology and Xinyuan Micro. It is expected to reach production in November 2026; the new plant in Beijing has a design capacity of 2 billion yuan, focusing on customers in mainland China such as North China Huachuang, Yitang Co., Ltd., and Huahai Qingke. 2027 1 Yueda production; factories in Singapore and the US are under construction, and production is expected to begin in 2024; in addition, the company is also building precision parts production lines for special fields, with a design capacity of 1 billion yuan, mainly to supply customer B, and is expected to reach production in December 2030.
The scale effect unlocks superimposed capacity utilization increases, and the company's profit margin is expected to reach an inflection point and accelerate upward in 2024. The company's profit and net interest rate were under year-on-year pressure in 2023, mainly due to the fact that the scale effect was not fully released, capacity utilization declined, and expenses were calculated; looking ahead to 2024, with the gradual release of production capacity at the company's Nantong plant, the scale effect will continue to increase, compounded by the steady resumption of overseas business growth and the acceleration of domestic business, etc., and the company's profit margin is expected to reach an inflection point and accelerate upward trend. At the same time, the company released the 2024 equity incentive plan (draft), demonstrating confidence in profit growth in 2024-2025. The company plans to grant 1.65 million restricted shares to 47 people, including directors, executives, and core technical personnel, accounting for 0.7893% of the share capital. The trigger values for the 2024/2025 deducted non-net profit assessment are 250 million yuan and 400 million yuan respectively, with year-on-year increases of 58.2% and 60%, respectively; the 2024/2025 non-net profit assessment target values are 400 million yuan and 550 million yuan, respectively, up 153 percent and 37.5% year on year, respectively.
Investment advice. The company's revenue in 2023 grew steadily year on year, domestic demand continued to rise, and overseas revenue was under pressure; the company's profit for the full year of 2023 was under year-on-year pressure, and profit margins fell sharply year on year, mainly due to the effects of large-scale production line not yet fully reflected, changes in product structure, and high cost calculation. Looking ahead to 2024, the company's revenue growth is expected to accelerate as the prosperity of foreign equipment manufacturers recovers and domestic equipment manufacturers improve marginally; with the successive commissioning of the Nantong plant, etc., the large-scale effect of the company gradually becomes apparent, and the company's profit margin is expected to reach an inflection point and accelerate upward. At the same time, the company's 2024 equity incentive plan (draft) also shows confidence in profit growth in 2024-2025. Based on the 2023 performance report, our 2023/2024/2025 revenue reached 20.7/33.2/4.53 billion yuan, and the net profit to mother for 2023/2024/2025 was 1.6/40/5.2 billion yuan, corresponding PE was 85.1/33.4/25.8 times, maintaining the “increase in holdings” investment rating.
Risk warning: Risk of macroeconomic and industry fluctuations, increased industry competition, insufficient progress in R&D and verification, continued pressure on gross margins, loss of technical talent, and leakage of core technology.