Net profit of 330 million yuan returned to mother in '23, maintaining a “buy” rating

Dongcai Technology released its annual report for the year 23 on April 12. In 2023, it achieved revenue of 3.74 billion yuan (yoy +2.7%), net profit to mother of 330 million yuan (yoy -20.8%), and deducted non-net profit of 220 million yuan (yoy -12.8%). Of this, 23Q4's net profit was 0.2 billion yuan (yoy -67.9%, qoq -73.1%).

Net profit for 24Q1 was 50 million yuan, -28.2%/+120.4% YoY. The company plans to pay a cash dividend of 1.5 yuan (tax included) for every 10 shares. We expect the company's net profit to be 5.52/6.84/855 million yuan in 2024-2026, respectively, and the corresponding EPS of 0.60/0.74/0.93 yuan. Comparatively, the company's 24 wind unanimously expected the average PE value to be 19 times. Considering the continuous increase in the company's share of high-end electronic resins, the company was given an estimated value of 25 x PE in 24, with a target price of 15.00 yuan, maintaining a “buy” rating.

Demand for some products declined in stages. The company actively seizes the incremental market and demand for some products weakens. The company actively optimizes the product structure and actively seizes the market. In terms of electronic materials, sales yoy +32.9% to 39,000 tons, revenue yoy +6.2% to 80,000 million yuan, gross margin yoy-1.7pct to 17.5%; in terms of optical film materials, sales yoy +17.0% to 88,000 tons, revenue yoy +3.8% to 960 million yuan, gross margin yoy +3.4pct to 14.8%; in terms of new energy materials, sales yoy +19.9% to 58,000 tons, revenue yoy +0.5% to 1.31 billion yuan, gross margin yoy-6.3 pct to 23.7%.

The annual comprehensive gross margin yoy-1.7pct was 19.0%, and the period expense ratio yoy+0.5pct was 12.9%.

The 23Q4 comprehensive gross margin was -1.7/+0.9pct to 18.4%, and the period expense ratio was +3.3/+7.4pct to 17.6% month-on-month, mainly due to reasons such as the termination of the equity incentive plan to expedite confirmation costs.

24Q1 sales continued to grow, with an expense ratio of -3.8/-8.7pct to 8.91% year-on-month. In terms of electronic materials, 24Q1 sales yoy +45% to 11,000 tons, revenue yoy -26% to 130 million yuan; in terms of optical film materials, sales yoy -6% to 18,000 tons, revenue yoy +1% to 210 million yuan; in terms of new energy materials, sales volume yoy +26% to 20,000 tons, revenue yoy -3% to 330 million yuan; revenue for electrical insulation materials YOY +3% to 90 million yuan, and revenue from environmentally friendly flame retardant materials YOY +66% to 0.4 billion yuan. Q1 The comprehensive gross margin was -8.9/-5.7pct to 12.7%, and the period expense ratio was -3.8/-8.7pct to 8.91% month-on-month.

Investment projects are progressing in an orderly manner, and it is expected that the company's performance will increase one after another

In 2023, the company successfully completed trial production of various projects such as the “Special Functional Polyester Film Project”, the “Optical Grade Polyester Base Film Project with an annual output of 20,000 tons for new display technology”, and the “High Performance Polyester Substrate Film Project for MLCC and PCB with an annual output of 20,000 tons”. The construction progress of projects such as the “Optical Grade Polyester Substrate Project for Polarizers with an annual output of 25,000 tons” and the “Technical Transformation Project for Ultra-thin MLCC Optical Grade Polyester Substrates with an annual output of 20,000 tons” has basically met expectations. As new production capacity is released one after another, it is expected that the company's performance will gradually increase.

Risk warning: Downstream demand growth falls short of expectations; progress of new projects falls short of expectations; domestic substitution progress falls short of expectations.