Matters:
Su Test released its 2023 annual report: In 2023, the company achieved revenue of 2.12 billion yuan, a year-on-year increase of 17.3%, achieved net profit of 314 million yuan, an increase of 16.4% over the previous year; realized net profit without deduction of 280 million yuan, an increase of 17.1% over the previous year.
Commentary:
The results slightly surpassed the previous forecast center. The company achieved revenue of 2.12 billion yuan in 2023, an increase of 17.3% over the previous year, and achieved net profit of 314 million yuan, an increase of 16.4% over the previous forecast. The company's gross margin/net margin in 2023 was -1.06 pct/+0.16 pct, respectively, maintaining a steady level; the company's 2023 sales/management/R&D/financial expense ratios were 6.4%/10.9%/7.87%/1.16%, respectively, +0.05pct/-1.65pct/+0.42pct/-0.71pct, respectively.
The equipment sector is growing the fastest, and the gross margin of integrated circuits is expected to increase. Looking at the revenue structure, the company's environmental testing business achieved revenue of 1.0 billion yuan, +19.5%, accounting for 47.4% of revenue; the test equipment sector achieved revenue of 753 million yuan, +23.0% year over year, accounting for 35.6% of revenue, or mainly due to prolonged settlement cycles and demand delays in downstream special industry customers; the integrated circuit business achieved revenue of 257 million yuan, +2.3% year over year, accounting for 12.1% of revenue. It is expected that after the commissioning of newly purchased equipment is completed in 24, the sector's revenue growth rate is expected to accelerate. In terms of gross margin, the gross margin of the environmental test/test equipment/integrated circuit was 58.8%/32.8%/43.3%, respectively, +1.85pct/-1.01pct/ -13.8pct, respectively. The profitability of the environmental test and equipment sector remained steady, and the gross margin of the integrated circuit sector declined or the number of talent reserves mainly increased rapidly. Related costs and expenses increased significantly, dragging down performance in stages. At the same time, some purchased equipment was not yet in place to affect revenue release. We expect that in the future, as the scope of the company's integrated circuit testing business increases, production capacity will be put in place one after another, and cost reduction and efficiency management will continue to improve.
I am optimistic that the improved demand in 2024 will release the company's production capacity. In 2023, due to the phased impact of testing requirements in special industries and the semiconductor sector and the extension of settlement cycles, the combination of factors of resilience on the cost side of physical inspection had a phased impact on the company's profit performance. We believe that the linkage of the company's equipment and services forms a high-tech barrier. The company's laboratory layout is improving the layout of special laboratories, preparing to build a Thai laboratory, and continuously broadening the application of service capabilities in aerospace, communications, etc. We expect the gradual recovery of demand in the military, new energy, electronics, aerospace and other industries in 2024, which will drive the release of production capacity invested in the company's fund-raising projects and integrated circuit equipment, and the subsequent growth rate of performance is expected to improve marginally.
Investment advice: Considering that the manufacturing boom in 2023 falls short of expectations, demand from downstream special industries has been delayed, and it will take some time for equipment to be in place, we have lowered our profit forecast appropriately. We expect revenue for 2024-2026 to be 25.17/30.22/3,596 billion yuan, respectively (pre-2024-2025 value forecast was 28.3/3.60 billion yuan), with a year-on-year growth rate of +18.9%/+20.1%/+19.0%; corresponding net profit to mother for 2024-2026 was 3.86/4.88/ 603 million yuan (the value forecast before 2024-2025 is 475/636 million yuan), an increase of 22.8%/26.6%/23.5% year-on-year. We refer to the average valuation of comparable companies and give the company 25XPE in 2024, with a target price of about 19 yuan. Maintain a “strong” rating.
Risk warning: Capacity expansion is falling short of expectations; competition for testing services is intensifying; downstream sentiment is declining.