2023 results are in line with our expectations

The company announced its 2023 results, achieving revenue of 2,667 billion yuan, -2.0% YoY (adjusted caliber); net profit to mother was 222 million yuan, or -43.1% YoY (adjusted caliber), corresponding to earnings of 0.23 yuan per share, which is in line with our expectations. Of these, 4Q23 achieved revenue of 795 million yuan and net profit of 46 million yuan to mother.

Development trends

The semiconductor industry gradually recovered in 2023 and may continue to improve in 2024. Global semiconductor industry sales were sluggish in early 2023, but there was a strong rebound in the second half of the year. According to SIA and WSTS data, global semiconductor industry sales in 2023 totaled $526.8 billion, YoY -8.2%; however, 4Q sales were US$146 billion, QoQ +8.4%, and YoY +11.6%, achieving the best growth since 2020.

In 2024, the company expects the global semiconductor industry to show a recovery trend.

CMP's one-stop layout is perfect. In 2023, the company achieved CMP polishing pad sales revenue of 418 million yuan, YoY -8.7%; of these, 4Q achieved sales revenue of 149 million yuan, a record high in single-quarter revenue, and recovered quarterly. In 2023, CMP polishing and cleaning solutions grew rapidly, achieving annual revenue of 77 million yuan and YoY +330.8%. Shows the amount of accelerated material release. In 2023, the company's display materials achieved revenue of 174 million yuan, YoY +267.8%. The company has become the number one supplier of YPI and PSPI for some mainstream panel companies in China. Advanced packaging materials are actively verified. The company's advanced packaging mainly revolves around product series such as PI and temporary bonding adhesives. Some products have been verified, and we expect mass production and introduction in 2024.

It is proposed to issue convertible bonds to increase the photoresist business. The company recently announced that it plans to issue convertible bonds to raise no more than 920 million yuan for 300-ton KrF/ArF photoresist projects and upstream raw materials for optoelectronic semiconductor materials. Implement repurchase plans and plan cancellations to raise the level of earnings per share. The company announced the fourth phase of the share repurchase plan in early February and completed implementation in early March. A total of 7,448,800 shares were repurchased, accounting for 0.79% of the total share capital, and the payment amount was about 150 million yuan. According to subsequent announcements, the company plans to repurchase shares to cancel and reduce registered capital accordingly.

Profit forecasting and valuation

We keep the company's 2024/25 profit forecast of 435/577 million yuan unchanged. The current stock price corresponds to 47/35 times the price-earnings ratio for 2024/25. Maintaining an outperforming industry rating, and considering the upward shift in sector valuation and the company's new product breakthroughs, we raised our target price by 15% to 27.0 yuan, which corresponds to 59 times the 2024 price-earnings ratio, and has 25% room to rise compared to the current stock price.

risks

There is a risk of impairment of goodwill, and sales of polishing pads and polishing liquid fell short of expectations.