The company's profits are high, orders are abundant, and production capacity for slicing and diamond wire continues to be released. Benefiting from the company's increased orders for cutting equipment and the increase in diamond wire and chip foundry shipments in 2023, the company achieved revenue of 6.184 billion yuan, +73.19% year over year, net profit to mother of 1,461 billion yuan, +85.28% year over year, net profit of non-return mother of 1,435 billion yuan, +91.32% year over year.
The company plans to distribute a cash dividend of 4.50 yuan (tax included) to all shareholders for every 10 shares, using capital reserve to increase 6 shares for every 10 shares. We expect the company's net profit to be 15.30/18.31/2229 million yuan in 24-26. Comparable to the company's 24-26 net profit of 15.30/18.31.229 billion yuan, the company is given 8 times PE in 24 years, and the target price is 36.08 yuan (previous value: 56.56 yuan), maintaining the “buy” rating.
Revenue from equipment, diamond wire consumables, and cutting processing services increased in 23 years. Looking at the gross margin of diamond wire increased by business, the company achieved growth in all of 2023:1) PV cutting equipment achieved revenue of 2,877 billion yuan, +95.16%, gross profit margin 32.19%, year-on-year -1.01pp; 2) Diamond wire achieved revenue of 1,162 billion yuan, +38.36% year on year, gross profit margin of 58.55%, +15.45pp; 3) Silicon wafer cutting and processing services achieved revenue of 1,719 billion yuan, +84.99% year on year. Gross profit margin 43.01%, -2.44pp; 4) Innovation business revenue was 255 million yuan, +60.71% year over year, gross profit margin 56.63%, +2.22pp year on year. The company quickly promoted the iteration of high-carbon steel diamond wire to 34 μm, 32 μm and 30 μm lines, and actively stocked R&D tests for finer diamond wire and tungsten wire, and achieved an increase in gross margin against the backdrop of falling diamond wire prices.
Gross margin and net margin increased for the full year of 2023, and profitability declined by 42.49% in 2023, the company's gross profit margin in 2023 was 42.49%, +0.98pp year on year, net profit margin 23.63%, and +1.54pp year on year.
23Q4's gross profit margin was 35.04%, year-on-month -9.18pp, month-on-month -9.78pp, net profit margin 14.62%, year-on-year -11.50pp, and -12.54pp. We believe that the decline in profitability in the fourth quarter was mainly due to the company taking the initiative to make concessions to downstream customers against the backdrop of increased downstream competition and insufficient operating rates. In terms of expenses, the company's sales/management/R&D/finance rates in 2023 were 2.41%/6.79%/6.29%/0.39%, respectively, -0.20pp/+0.10pp/ -0.02pp/+0.08pp. The total rate for the period was 15.88%, -0.05pp year on year, and the cost control capability was good.
In-hand orders for equipment were abundant, and production capacity for silicon wafer cutting was gradually released. As of December 31, 2023, the company ordered 2,260 billion yuan (tax included) for photovoltaic cutting equipment products, +53.32% over the same period last year, and 100 million yuan (tax included) for innovative business equipment products, +36.99% compared to the same period last year. The company's silicon wafer cutting and diamond wire production capacity is expected to continue to be released in 2024. The “Yibin (Phase I) 25GW PV Large Silicon Wafer Project” has entered the preparation stage. Production is expected to reach production in the first half of 2024. The production capacity of the company's silicon wafer cutting and processing services will reach 63 GW by the end of '24. The “Huguan (Phase I) Project with an annual output of 40 million kilometers” is under construction. Production capacity is expected to be released in the first half of 2024. After full release, the company's King Kong Wire production capacity will reach more than 100 million kilometers.
Risk warning: The price war in the main photovoltaic industry chain is intense, competition for diamond cables is intensifying, and technology research and development falls short of expectations.