Core views

In 2023, the company achieved net profit of 4.558 billion yuan, an increase of 55.85% over the previous year, and is within the previous performance forecast range. The company's equipment+materials are being developed in depth, and the platform-based layout performance is expected to continue to grow steadily. On the equipment side, at the end of 2023, the company did not complete contracts for crystal growth equipment and intelligent processing equipment totaling 28.258 billion yuan, with plenty of orders; companies in the field of photovoltaic equipment completed the layout of the entire industry chain and accelerated innovation in fifth-generation monocrystalline furnaces, battery equipment, component equipment, etc.; semiconductor equipment seized the domestic alternative market, and continued to launch new products in the field of power semiconductors and advanced manufacturing processes. On the material side, it has benefited from the tight supply of quartz crucibles and the continuous release of the company's production capacity. While revenue is growing rapidly, it has maintained a high level of profit and an outstanding market position. Furthermore, the company continues to promote the expansion of production and R&D of materials businesses such as diamond wire and silicon carbide substrates, and the scale and technical level of the industry are constantly improving.

occurrences

The company released its 2023 annual report. The company achieved annual revenue of 17.983 billion yuan, a year-on-year increase of 69.04%, and net profit of 4.558 billion yuan, an increase of 55.85% over the previous year; of these, the fourth quarter achieved operating income of 4.521 billion yuan, an increase of 42.37% over the previous year, and net profit to mother of 1,044 billion yuan, an increase of 13.96% over the previous year.

Brief review

Annual performance grew rapidly, and the increase in the share of the materials business led to an increase in gross margin. In 2023, the company achieved operating income of 17.983 billion yuan, a year-on-year increase of 69.04%, and net profit to mother of 4.558 billion yuan, an increase of 55.85% over the previous year. The company previously predicted that net profit for the full year of 2023 would be about 43.85 to 4.970 billion yuan, an increase of 50%-70% year on year. The actual performance was within the forecast range, and the overall performance was in line with expectations.

By sector, in 2023, the company's equipment, services and materials business achieved revenue of 128.12 billion yuan and 4.163 billion yuan, respectively, up 51.29% and 186.15% year-on-year; gross margins were 38.85% and 56.15%, respectively, and -1.95pct and +17.16pct, respectively. Benefiting from the increase in the share of the materials business with high gross margin, the annual gross margin increased by 2 pct to 41.65% year-on-year, and profitability remained steady.

Looking at the single quarter, 2023Q4's operating income and net profit to mother increased by 42.37% and 13.96%, respectively; the profit growth rate was slower than the revenue growth rate, which was related to the increase in impairment in Q4. Accumulated asset impairment losses and credit impairment losses in the single quarter were 235 million yuan and 42 million yuan respectively. The total year-on-year increase was 178 million yuan, affecting profit-side performance.

There are plenty of orders for equipment in hand, and new products continue to be launched. ① At the end of 2023, the company had not completed contracts for crystal growth equipment and intelligent processing equipment totaling $28.258 billion, of which $3,274 billion was uncompleted for semiconductor equipment, down 492 and 29 million yuan respectively from the end of 2023Q3. Abundant orders in hand provided support for short-term performance growth. ② In the photovoltaic field, the company completed the layout of the entire industry chain, successfully developed a fifth-generation monocrystalline furnace based on N-type products on the silicon wafer side, introduced semiconductor superconducting magnetic field technology into the photovoltaic field, completely opening the process window for low-oxygen N-type crystal growth; on the battery side, the company quickly promoted new product processes for photovoltaic cell equipment such as tubular PECVD, LPCVD, diffusion, annealing, single-chamber multi-vessel ALD, and Zhougan cleaning; on the module side, the entire line supply capacity of the tile stacking equipment production line was obtained. ③ In the semiconductor field, the company has accelerated the expansion of core equipment layout. In the field of power semiconductors, there have been breakthroughs in atmospheric pressure silicon epitaxial growth equipment, silicon carbide epitaxial growth equipment, silicon carbide substrates and optical measurement equipment for epitaxial sheet measurement; in the field of advanced manufacturing, the 8 inch and 12 inch silicon decompression epitaxial growth equipment and ALD equipment developed by the company have successively entered the verification stage.

Material production capacity has been released one after another, and the crucible business is making strong profits. ① Quartz crucible: In 2023, the production capacity of the company's Ningxia crucible production base increased, driving rapid growth in the quartz crucible business. Referring to data from the subsidiary Meijing New Materials (the company directly holds 57.84%), Meijing New Materials achieved revenue of 3.671 billion yuan, net profit of 1,778 billion yuan, net profit of 48.43%, and strong profitability. ② Diamond wire: The company has been in production since the first phase of the mass production project and achieved mass sales, actively promoted the construction of the second phase of the production expansion project, and accelerated the industrialization of tungsten wire. ③ Silicon carbide substrates: The company continues to strengthen the research and development of large-scale silicon carbide materials, and has built and put into operation the “Project with an annual output of 250,000 6-inch and 50,000 8-inch 8-inch silicon carbide substrates”. The core quality parameters of the 6-inch and 8-inch mass-produced chips have reached the first-class level in the industry. ④ Diamond cultivation: The subsidiary Jingxin Green Diamond successfully cultivated a 10-carat diamond.

Investment advice: The company's “advanced materials, advanced equipment” two-wheel drive maintains a leading position in the industry. We expect the company to achieve revenue of 220.30, 25.567, and 29.09 billion yuan in 2024-2026, up 22.51%, 16.05%, and 13.46% year-on-year respectively; net profit to mother will be 54.13, 62.21, and 7.097 billion yuan, respectively, up 18.77%, 14.93%, and 14.07% year-on-year respectively. The current market value corresponds to PE of 7.64, 6.65, and 5.83 times, respectively, maintaining a “buy” rating.

Risk warning:

① Risk of industry fluctuations: Benefiting from continued strong market demand in the downstream terminal industry, the company is developing rapidly and its performance is constantly improving. If the downstream market has cyclical or policy fluctuations in the future, and the growth trend of the downstream terminal industry gradually slows down, it will adversely affect the company's business performance.

② Order fulfillment risk: The photovoltaic and semiconductor industry is a key supported industry in China, and is currently in a period of rapid development. However, due to investment schedule adjustments and asset strength, some downstream customers may experience adverse situations such as canceling orders or proposing delayed delivery, and the company has the risk of unexecuted order fulfillment.

③ Technology R&D risk: As the technical level of the industry continues to improve and product requirements continue to rise, if the company is unable to quickly launch new products adapted to market demand according to the plan, it may affect the market competitiveness of the company's products and adversely affect the company's business development.