Incident: On March 26, 2024, Gaosec released its 2023 annual report. The company achieved annual revenue of 6.184 billion yuan, an increase of 73.19% over the previous year. Net profit attributable to mother was 1,461 billion yuan, up 85.28% year on year, and realized net profit deducted from mother was 1,435 billion yuan, up 91.32% year on year.
On a quarterly basis, 23Q4 achieved revenue of 1,973 billion yuan, a year-on-year increase of 42.97%, a year-on-month increase of 16.75%, and net profit to mother of 288 million yuan, a year-on-year decrease of 19.99%, a year-on-month decrease of 37.25%, after deducting net profit from non-return mother of 295 million yuan, a year-on-year decrease of 11.68% and a year-on-month decrease of 34.15%. We believe that the month-on-month decline in Q4's performance was mainly affected by industry fluctuations. The decline in profits in the PV industry as a whole led to a decline in the profitability of the company's chip foundry and diamond wire businesses.
The equipment, consumables, and slicing business have all achieved high growth. Photovoltaic cutting equipment: Production and sales increased dramatically, achieving revenue of 2,877 billion yuan, an increase of 95.16% year on year, and on-hand orders of 2.26 billion yuan, an increase of 53.32% year on year.
King Kong Cable: Achieved revenue of 1,162 billion yuan, up 38.36% year on year, annual sales volume (excluding personal use) of about 38 million kilometers, up 51.08% year on year. Slicing: Production capacity was quickly released. As of December 31, 2023, the company had planned production capacity of 102 GW, implemented a production capacity of 38 GW, and effective delivery of about 25.5 GW throughout the year, achieving revenue of 1,719 billion yuan, an increase of 84.99% year on year. Innovative business: Orders increased dramatically, and product competitiveness continued to lead. Annual revenue of 255 million yuan was achieved, an increase of 60.71% over the previous year. The total number of orders in hand was 100 million yuan, an increase of 36.99% over the previous year.
Advanced production capacity continues to be released, and the share of tungsten diamond wire has increased. In terms of slicing, the first phase of the company's Yibin 25GW slicing project was completed and put into operation in January '24. Production is expected to reach production in June '24, and the annual slicing shipment target is 50GW. In terms of diamond wire, the Huguan Phase I production capacity of 40 million kilometers is expected to be put into operation in the first half of '24. The company's shipment scale is expected to exceed 100 million kilometers throughout the year, and the market share is expected to continue to increase. Furthermore, the company will accelerate research and development of tungsten diamond wire and production capacity construction. It is estimated that tungsten wire will account for more than 20% of shipments in '24.
Pay attention to shareholder reports and implement profit dividends. In 2023, the company plans to distribute a cash dividend of RMB 4.5 (tax included) for every 10 shares to all shareholders and increase 6 shares for every 10 shares using capital reserves. The cash dividend is expected to be approximately RMB 153 million, including the medium term of RMB 339 million. The annual cash dividend is expected to be approximately RMB 492 million, and the annual cash dividend accounts for 33.65% of net profit attributable to mother. In the last three years, the company's cumulative dividend is expected to be about 601 million yuan? Investment advice: The company's 24-26 revenue is expected to be 73.56/94.25/11.143 billion yuan, respectively, and net profit to mother is 10.41/13.67/1,693 billion yuan respectively, corresponding PE is 11x/8x/6x. The company is a leading company in silicon wafer cutting, equipment and consumables. The innovative business is expected to provide additional volume and maintain the “recommended” rating.
Risk warning: downstream demand falls short of expectations, market competition increases risks, etc.