Incidents:
The company released its 2023 annual report, and the results were in line with expectations. In 2023, the company achieved operating income of 2,667 billion yuan, yoy -2%; net profit to mother of 222 million yuan, yoy -43.08%; deducted non-net profit of 164 million yuan, yoy -52.79%; and EPS was 0.24 yuan/share.
Profits are under pressure in the short term, and the semiconductor business is growing steadily
Affected by macroeconomic fluctuations, the company's revenue declined slightly year on year in 2023, yoy -2%; the company's net profit fell sharply year on year, mainly due to excessive investment in new product research and development, and increased interest expenses and exchange losses. By business, in 2023, the company's general consumables business for printing and copying achieved revenue of 1,786 billion yuan, yoy -8.08%; the semiconductor sector business achieved revenue of 857 million yuan, yoy +18.82%. In the semiconductor sector, in 2023, the company's CMP polishing pads achieved revenue of 418 million yuan, yoy -8.65%; CMP polishing liquid and cleaning solution achieved revenue of 77 million yuan, yoy +330.84%; display materials achieved revenue of 174 million yuan, yoy +267.82%.
Continued investment in new materials is expected to achieve significant growth in 24 years
The company adheres to the strategy of replacing “innovative material platform enterprises” with imports, and continues to increase R&D investment in key materials. In 2023, the company's R&D expenses were 380 million yuan, yoy +20.2%. In terms of CMP polishing liquid, some products have entered the domestic mainstream customer supply chain system and are gradually being increased; metal gate polishing liquid equipped with self-produced alumina grinding particles has been successfully introduced into the customer supply chain and has met the continuously rising order demand of customers.
In terms of display materials, the company has become the number one supplier of YPI and PSPI products for some mainstream panel customers in China, and is expected to continue to benefit from the boom in flexible OLEDs in 24 years. In terms of photoresists, the company has deployed 16 mainstream wafer photoresists that have not broken through in China, including 8 high-end KrF photoresists and 8 ArFi photoresists. Customer samples of 7 products have been sent, and the test results have all been unanimously approved by customers; the rest of the products are scheduled to be sampled by customers in 2024. Looking ahead to 2024, the company's CMP polishing solution and display materials are expected to benefit from domestic substitution to achieve significant growth.
Profit Forecasts, Valuations, and Ratings
We expect the company's revenue for 2024-2026 to be 32.01/37.60/4.323 billion yuan, respectively, with year-on-year growth rates of 20.01%/17.47%/14.98%, net profit to mother of 4.11/5.88/ 758 million yuan respectively, year-on-year growth rates of 85.05%/43.13%/28.99%, EPS of 0.43/0.62/0.80 yuan/share, respectively, and a 3-year CAGR of 50.61%. As the company's semiconductor materials business is gradually entering a period of rapid development, it is recommended to keep an eye on it.
Risk warning: Downstream demand recovery falls short of expectations, and product verification falls short of expectations.