Event: On April 9, 2024, the company released its 2023 annual report. In 2023, the company achieved operating income of 2,667 billion yuan, a year-on-year decrease of 2.00%; realized net profit of 222 million yuan, a year-on-year decrease of 43.08%; realized net profit of 164 million yuan after deduction, a year-on-year decrease of 52.79%.
The company's performance is under pressure in the short term and is expected to continue to improve in the future. In 23Q4, the company achieved operating income of 795 million yuan, a year-on-year increase of 3.72%, and a month-on-month increase of 11.42%; realized net profit of 46 million yuan, a year-on-year decrease of 51.96% and a year-on-month decrease of 43.09%; and realized net profit without return to mother of 35 million yuan, a year-on-year decrease of 55.63%.
The main reasons for the year-on-year change in the company's business performance in 2023 are: (1) the company continued to increase R&D investment in new semiconductor innovative materials projects; (2) the year-on-year decline in bank loan interest expenses due to the construction of the company's Xiantao Industrial Park and the year-on-year decline in exchange rate fluctuations. The two factors combined affected the net profit to the mother by about 29.65 million yuan; (3) the long-term equity investment income of participating companies calculated according to the equity law declined year-on-year; (4) Qijie Technology's implementation of employee shareholding plans affected changes in equity and confirmed equity incentive costs, and Beihai Xunxun's new performance board listing Intermediary expenses; (5) The company's CMP polishing pad business experienced a decline in sales in the first half of the year due to weak production capacity due to poor production capacity, and the company's CMP polishing liquid and other products were not yet profitable; (6) the long-term equity investment of participating companies depreciated. As downstream demand for CMP polishing pads gradually picks up and various other new materials enter the release stage, the company's performance is expected to continue to improve.
The semiconductor CMP layout continues to improve, highlighting the leading position in the domestic industry. The one-stop layout of core consumables for the semiconductor CMP process continues to be improved. The CMP polishing pad business showed a clear trend of recovery and growth from quarter to quarter, and sales revenue in the fourth quarter reached a record high in a single quarter. CMP's polishing liquid and cleaning liquid business has entered a rapid growth stage, achieving sales revenue of 77 million yuan in '23, an increase of 330.84% over the previous year. In terms of CMP polishing solutions, the marketing of all process products continues. Metal gate polishing solutions equipped with self-produced alumina grinding particles have been successfully introduced into the customer supply chain; demand for dielectric layer polishing solutions and polycrystalline silicon polishing solutions equipped with self-produced ultrapure silicon grinding particles continues to grow; copper and barrier layer polishing solutions have begun to be verified in mainstream domestic customer production lines, and cerium oxide polishing solutions suitable for dielectric layer processes continue to be developed. In terms of cleaning solutions, various process cleaning solutions other than copper were developed in 2023 to solve customer production line problems, and the product introduction results were good.
Leveraging the advantages of technology accumulation, photoresist and other related R&D projects are progressing smoothly. In the wafer photoresist project, polymer synthesis of high-purity resins for KrF/ArF photoresists was achieved based on the polymer synthesis technology foundation of color polymeric toner resins; organic synthesis of high-purity monomers for photoresists was carried out based on the organic synthesis technology foundation of PSPI for OLED displays and PSPI monomers for packaging. Based on the sphere technology of organic polymer microspheres mastered in color chemical toner products and magnetic carriers, it relies on physical chemistry and polymer synthesis technology platforms to help develop expandable hollow microspheres as the key raw material for polishing pads.
Investment advice: We are optimistic about the business growth of the company's CMP materials and semiconductor display materials. We expect the company's net profit to be 4.13/5.83/728 million yuan in 2024-2026, respectively. The PE corresponding to the current price is 48/34/27 times, respectively, maintaining the “recommended” rating.
Risk warning: downstream demand falls short of expectations, customer verification falls short of expectations, market competition intensifies, etc.