Performance summary: The company released its annual report for '23. In '23, the company achieved revenue of 6.18 billion yuan, +73.2% year on year; net profit to mother of 1.46 billion yuan, +85.3% year over year; net profit of 1.44 billion yuan, +91.3% year over year. In addition, the company announced a profit distribution plan for the year 23. It plans to distribute a cash dividend of 4.5 yuan (tax included) for every 10 shares to all shareholders, and at the same time increase 6 shares for every 10 shares of all shareholders using the capital reserve.
Cutting equipment: Sales of photovoltaic cutting equipment doubled, and attention was paid to the iterative demand for slicer upgrades in 24 years. In '23, the company's silicon wafer cutting equipment revenue was 2.88 billion, with sales volume of 3097 units, +105% over the same period last year, and the average sales price decreased by about 5%. By 1231, the company's on-hand orders for silicon wafer cutting equipment were 2.3 billion (tax included), and the revenue for silicon wafer cutting equipment in '24 is expected to be on par with '23. We believe that the current market is focusing on the peak of silicon wafer production expansion, while ignoring the need to upgrade existing chip production capacity equipment. With the advancement of thinning and thinning, there is a need to upgrade equipment for old slicing production capacity, which can support the company's full orders.
King Kong Wire's profit reached a new level, focusing on the company's cost and profit advantages after carbon steel wire prices bottomed out in 24 years. In '23, the company exported 38 million km+, and the gross margin increased by 15 pp+ to 58.6%. The main reason was that the operating rate was full, taking full advantage of the effects of scale to reduce costs, lower bus prices, and better linear premiums and profits. The price of 24Q1 diamond wire basically bottomed out. In April, silicon wafer construction started well and the price of diamond wire was stable. We think we should now pay attention to the super profit level of King Kong wire leaders after the price war, and give a higher valuation to such super strong alpha attributes. At the same time, the price of carbon steel wire is stabilizing, and there is limited room for price reduction. It is recommended to focus on the company's leadership in iterative application of fine tungsten wire.
Slicing foundry production and sales doubled, and unit profits in the 24s were supported by a bottom line. The company's chip foundry revenue in '23 was 1.72 billion, and the shipment volume was 25.2 GW. The operating rate fluctuated to a certain extent in 23Q4 due to silicon wafer start-up. The profit of a single GW foundry is estimated to be about 13 million yuan for the whole year. The OEM model for a company with a higher number of silicon rods per unit is the preferred solution for second- and third-tier silicon wafer companies. Considering the company's own use of diamond wire, the actual profit per slice unit was better than expected.
A batch order was formed for the silicon carbide slicer, and the diamond wire iterative process gradually began. The company's innovative business revenue increased 60% + year over year in '23, and the 8-inch silicon carbide slicer was recognized by leading customers and orders were formed. In the field of silicon carbide cutting, the process of diamond wire iterative mortar line is accelerating, and the progress of diamond wire cutting penetration rate is worth paying attention to
Profit forecast and investment suggestions: The company's leading position in photovoltaic cutting equipment is stable. Diamond wire production and sales are expected to maintain industry leadership as production capacity expands and thinning iterations, and the slicing business highlights technological alpha in the era of thinning and thinning. The company's net profit for 24/25/26 is estimated to be 11.5/14.5/1.82 billion yuan, respectively, maintaining a “buy” rating.
Risk warning: risk of global PV installation demand falling short of expectations; risk of downstream silicon wafer expansion falling short of expectations; risk of rising raw material costs and declining company profitability; risk of falling sharply in silicon wafer prices.