2023 is a year of momentum for new businesses and products. Dinglong Co., Ltd. is a leading domestic platform company that imports various core “stuck neck” alternative innovative materials in key racetrack fields. In addition, it also lays out the entire industry chain in the traditional printing general consumables business. In 2023, we achieved operating income of 2,667 billion yuan, a year-on-year decrease of 2.00%; net profit to mother was 222 million yuan, a year-on-year decrease of 43.08%; net profit after deduction was 164 million yuan, a year-on-year decrease of 52.79%. The main reasons for the decline in profits include, but are not limited to: increased R&D expenses, interest expenses due to the construction of the Xiantao Industrial Park, year-on-year decline in income from long-term equity investments, and expenses for equity incentives and intermediary expenses.
23Q4's revenue in a single quarter was 795 million yuan, a record high in nearly 3 years. On a quarterly basis, the company's quarterly revenue for 23Q1-23Q4 was 547 million yuan, 613 million yuan, 713 million yuan, and 795 million yuan, respectively. The quarterly revenue showed a quarterly upward trend, and 23Q4 revenue had reached a record high in nearly 3 years; net profit without deducted return to mother was 20.991 million yuan, 471,485 million yuan, 61.34 million yuan, and 34.8931 million yuan, respectively.
Revenue from optoelectronic semiconductor materials and chips has reached 32.12% of revenue. By product, the revenue from the general consumables business for printing and copying in 2023 (including color polymeric toner, developer rollers, carriers, toner cartridges, etc.) was 1,786 billion yuan, accounting for 66.97% of revenue, down 8.08% year on year, and gross margin of 24.85%; optoelectronic semiconductor materials and chips (including CMP polishing pads, CMP polishing liquid, CMP cleaning solution, YPI, PSPI, TFE-INK, chips, etc.) had revenue of 857 million yuan, accounting for 32.12% increase over the previous year, 18.82% of gross margin 61.48%
Investment in R&D has been increased, and the introduction and verification of new products is progressing smoothly. In 2023, the company invested 382 million yuan in R&D, up 19.84% year on year, accounting for 14.33% of revenue. ①. In the CMP process, the CMP polishing pad business has recovered well from quarter to quarter, and the introduction and release of CMP polishing liquid and cleaning liquid products is progressing smoothly; ②. Semiconductor display materials, the company has become the first supplier of YPI and PSPI products for some mainstream domestic panel customers. The film packaging material TFE-INK has passed the certification of major downstream customers, imported customers in 23Q4 and obtained batch orders; ③, high-end wafer photoresist. The company has completed customer samples for 7 products, and the test results have been unanimously approved by customers. The remaining 9 products are planned to be approved by customers in 2024 Customer sample delivery was completed in the year; ④, semiconductor advanced packaging materials business verification is progressing smoothly.
Profit forecasting and valuation recommendations. We expect Dinglong's 2024E-2026E revenue to be $3.132 billion, RMB 3,674 billion and RMB 4.478 billion, respectively, and net profit to mother of RMB 411 million, RMB 592 million and RMB 857 million respectively. Using the PE valuation method, combined with comparable company valuation levels, Dinglong was given a fixed valuation premium of PE (2024E) 45x-55x, corresponding to a reasonable market value range of 18.508 billion yuan to -22,621 billion yuan, corresponding to a reasonable value range of 19.57 yuan/share - 23.92 yuan/share. This time, it was upgraded to a “superior to the market” rating.
Risk warning: Downstream customer capacity utilization rates fall short of expectations, product prices falling due to increased market competition, slow progress in new product development than expected, risk of core technicians leaving their jobs, etc.