Incident: The company released its 2023 annual report. In 2023, the company achieved revenue of 712 million yuan, +7.51% year over year; net profit to mother was 174 million yuan, -7.57% year over year. Among them, the fourth quarter of 2023 achieved revenue of 210 million yuan, +15.33% year-on-month, and +2.08% month-on-month; net profit to mother was 49 million yuan, -13.71% year-on-year, and -5.09% month-on-month.
The company's revenue showed positive growth, and the share of high-end products continued to increase. The semiconductor industry experienced significant pressure in 2023 to the point of recovering from bottom. At the same time, with the development of 5G, AI, advanced packaging, and new energy vehicles, it is further driving the demand for high-end new materials. The company's revenue showed positive growth in 2023, with the share of high-end products continuing to increase, and vigorously expanding new application fields such as thermal conductive materials. Looking at specific products, (1) Rectangular inorganic powder: In 2023, the company's revenue of angular inorganic powder was 233 million yuan, +0.61% year over year; gross margin was 32.75%, down 2.66 percentage points year on year; sales volume was 70,600 tons, +3.02% year over year. (2) Spherical inorganic powder: In 2023, the company's revenue for spherical inorganic powder was 369 million yuan, +4.19% year over year; gross margin was 46.22%, up 3.17 percentage points year on year; sales volume was 25,800 tons, +8.37% year over year.
The company attaches importance to R&D investment and continues to improve product layout. The company invested 47.4 million yuan in R&D in 2023, +23.13% year-on-year. R&D investment accounted for 6.66% of revenue; 13 intellectual property rights were obtained. The company keeps an eye on trends in downstream fields such as EMC, LMC, GMC, UF, electronic circuit substrates, thermal interface materials, etc., and continues to launch a variety of low CUT point Lowα micron/sub-micron spherical silicon powder, low loss/ultra-low loss spherical silicon powder for high frequency high speed copper clad plates, and high thermal conductivity micron/sub-micron spherical alumina powder for new energy batteries. The sales volume of the company's spherical products continues to increase.
The company continues to build production capacity and consolidate its leading position in the industry. In October 2023, the company announced that it plans to invest 128 million yuan to build electronic-grade functional powder materials for integrated circuits to meet the market demand for electronic-grade functional powder materials for integrated circuits. The project design capacity is 25,200 tons/year. In March 2024, the company announced that it plans to invest 129 million yuan to implement an ultra-fine spherical powder production line construction project with an annual output of 3,000 tons for advanced integrated circuits to further expand the production capacity of spherical powder materials. In addition, the company announced that it plans to invest about 100 million yuan to build an R&D center for advanced functional powder materials for ICs, and build a new 6,000-square-meter R&D building and related ancillary facilities. As the company's production capacity is built, it further meets customer needs in the fields of high-frequency high-speed substrates, packaging substrates, and high-end chip packaging materials for 5G communications.
Profit forecast and investment suggestions: The company is a leading domestic electronic grade silicon powder company. Its products break overseas monopolies, continuously expand categories, and continue to build production capacity. With the gradual implementation of the project, the company's leading position has been further consolidated. Furthermore, as the semiconductor industry recovers and the development of AI, 5G, advanced packaging, etc. drive demand for high-tech materials, the company's performance is expected to grow further. We forecast net profit attributable to mother for 2024-2026 to be 238 million, 292 million, and 341 million, respectively. Corresponding to the current PE, it is 33 times, 27 times, and 23 times, respectively, giving it a “buy” rating.
Risk warning: downstream demand falls short of expectations, R&D falls short of expectations, production capacity investment falls short of expectations, fluctuating raw material prices, increased industry competition, etc.