Description of the event
Sanlifu released its 2023 annual report. During the reporting period, the company achieved operating income of 2,068 billion yuan, a year-on-year decrease of 4.87%; realized net profit of 43 million yuan, a year-on-year decrease of 79.26%; and realized net profit deducted from non-mother of 0.3 million yuan, a year-on-year decrease of 80.37%.
Incident comments
In the fourth quarter, the company achieved operating income of 529 million yuan, a year-on-year increase of 3.34%; realized net profit attributable to mother of -0.16 million yuan, a year-on-year decrease of 181.00%; realized net profit deducted from mother of -190 million yuan, a year-on-year decrease of 411.08%. The gross profit margin for the fourth quarter of a single quarter was 16.52%, up 1.41 pct from month to month; net sales margin was -2.99%, down 9.06 pct from month to month. The company's gross sales margin recovered for two consecutive quarters after bottoming out in the second quarter, benefiting from an increase in the overall operating rate of the industrial chain. The increase in the expense ratio during the period mainly included the following aspects: 1) Sales repayments fell short of expectations during the reporting period, and the company's accrued losses increased by 44 million yuan year-on-year; 2) asset impairment losses calculated at the end of the year in preparation for bad debts and inventory price drops; 3) increased exchange losses.
In terms of industry sentiment, according to Omdia statistics, the average operating rate of LCD TV panel companies in the fourth quarter of 2023 was around 75%, down from the third quarter. The company's revenue for the fourth quarter remained stable month-on-month, reflecting a continued increase in share.
The downstream utilization rate of LCD TV panels increased dramatically in March 2024, and the inventory replenishment cycle within the year has begun. We expect the company's fundamentals to improve significantly in the first quarter of 2024.
In terms of new products, the company developed polarizer products that can meet the requirements of many application fields during the reporting period, and has the most complete product solutions in the industry. Among them, the circular offset for small to medium size 3D solid curved flexible AMOLEDs was successfully developed and mass production was achieved in the Q1 quarter of 2024, expanding the company's product line from LCD mobile phones+LCD TVs to the OLED market. In addition, polarizer products for differentiated applications such as semi-reflective eye protection LCDs, AR/VR folding light paths, AR-HUD, and light field screens are also continuing to be iterated or developed.
We believe that since the panel industry chain entered a downward cycle in 2021, when downstream panel manufacturing profits were under pressure, upstream materials were also under obvious price reduction pressure. However, with the restoration of the post-production price center in 2024 and the reduction of depreciation costs, the profitability of polarizers is expected to be repaired in the long term. The company's 2024-2026 EPS is expected to be 1.25, 1.89, and 2.47, and the corresponding PE is 19.78, 13.08, and 10.03, respectively.
Risk warning
1. Consumer electronics recovery falls short of expectations;
2. New product release progress falls short of expectations.