Introduction to this report:

The company has the advantage of integrating equipment, consumables and process technology. The order delivery performance of cutting equipment and consumables is good. The foundry slicing model is recognized by the market. The long-term layout of innovative businesses such as semiconductors, sapphires and magnetic materials has large market space.

Key points of investment:

Investment advice: Maintain 24-25 EPS at 4.97/5.84 yuan, add 26-year EPS at 6.67 yuan. According to the industry average of 7.68xPE, increase the target price to 38.17 (+0.35) yuan to increase holdings.

The performance was in line with expectations. In 2023, the company achieved revenue of 6.184 billion yuan/ +73.19%, net profit of 1,461 billion yuan/ +85.28%, deducted from non-return mother 1,435 billion yuan/ +91.32%. The fourth quarter achieved revenue of 1,973 billion yuan/YoY +16.80%, net profit to mother of 288 million yuan/YoY -20.11%, /month-on-month -37.23%, after deducting 295 million yuan/YoY -11.68%/YoY -34.1%. The company achieved gross profit margin of 42.49% /+0.98pct for the whole year, a net profit margin of 23.63% /+1.54pct; a gross profit margin of 35.04% /-9.18pct/month-on-month -9.78pct in a single fourth quarter, and a net profit margin of 14.62% /-11.50pct/month-on-month.

There are plenty of orders on hand, and profit levels have increased steadily. By the end of 2023, the company's current orders for photovoltaic cutting equipment totaled 2.26 billion yuan/ +53.32%, and the total number of on-hand orders for innovative business equipment was now 100 million yuan/ +36.99%. In 2023, the sales/management/ R&D/ finance expense rates were 2.41%/6.79%/6.29%/0.39%, respectively, -0.2/+0.1/-0.02/+0.08pct.

The company's core product orders have continued to break through, speeding up the expansion of new product layouts. 1) Photovoltaic cutting equipment:

Equipment updates and iterations have accelerated, product competitiveness continues to lead, production and sales have increased dramatically, market share continues to be number one, and it has steadily become the leader in the industry. The fifth-generation diamond wire silicon slicer GC700X has been continuously upgraded, and a new GC-700XL slicer, GC-800XP slicer, and GC-800X slicer have been introduced; 2) Diamond wire: quickly promotes the iteration of high-carbon steel wire to a 34/32/30 μm line type, while leading the industry to accelerate the iterative application of fine tungsten wire; 3) Silicon wafer cutting: driving the thickness of large silicon wafers such as 182 mm and 210 mm to iterate from 150 μm to 130 μm and achieve a continuous increase in yield.

Risk warning: market competition risks, slicing OEM business expansion falls short of expectations