2023 results are in line with expectations
The company announced its 2023 results: revenue of 17.983 billion yuan, +69.0% year over year; net profit to mother of 4.558 billion yuan, +55.9% year over year (forecast +50%-70% YoY). 4Q23 The company's revenue was 4.521 billion yuan, +42.4% year on year; net profit to mother was 1,044 billion yuan, +14% year over year. The company's annual dividend was 0.7 yuan/share, with a total cash dividend of 915 million yuan. The dividend ratio was ~ 20%, and the dividend ratio remained high in special equipment.
Development trends
The materials business grew rapidly, and the equipment business grew steadily. By business, in 2023, the company 1) equipment and service business: revenue of 12.812 billion yuan, maintaining a relatively rapid growth rate. We judge that it is mainly due to strong demand in the photovoltaic industry in 2023, the company's monocrystalline furnaces and other products are highly advanced, and market competitiveness leading the industry; the gross profit margin was 38.9%, year-on-year - 1.9ppt, mainly due to the increase in the share of low-margin intelligent processing equipment and services, and the gross margin of monocrystalline furnaces remained stable. 2) Materials business: Revenue of 4.163 billion yuan, +186.15% year-on-year, gross profit margin of 56.2%, year-on-year +17.2ppt. We judge that it is mainly due to the company's many years of laying out crucibles, the shortage of high-quality crucibles in 23 years, and the company's crucible business benefited from this sharp rise in volume and price. Meijing New Materials, a subsidiary of the company mainly engaged in quartz crucibles, recorded a net profit margin of 48.4% in 2023. The company's overall gross profit margin in 2023 was 41.7%, +2ppt year over year.
There are plenty of orders for equipment in hand, and high-quality crucibles are still scarce. In terms of equipment, as of December 31, 2023, the company has not completed contracts for crystal growth equipment and intelligent processing equipment totaling 28.258 billion yuan (tax included), of which 3,274 billion yuan (tax included) has not been completed, and the orders on hand are quite full. We estimate that new equipment orders of 15.321 billion yuan (excluding tax) will be received in 2023. In terms of materials, the company's public performance will indicate that high-quality crucibles are still scarce. Currently, orders on hand are greater than the company's production capacity. We judge that the price of crucibles is expected to remain at ~35,000 yuan/piece (tax included) in 2024, supporting high profitability; at the same time, the company continues to promote the release of production capacity for carbon/tungsten diamond wire and silicon carbide substrates (especially 8 inches).
Fee control was better during the period, and holding subsidiaries affected net interest rates. In 2023, the company's sales/management/R&D/finance expenses rate was 0.5%/2.3%/6.4%/-0.1%, respectively, compared with +0.03/-0.39/-1.12/+0.12ppt, and the cost control was better. The company's net interest rate in 2023 was 25.3%, year-on-year - 2.14ppt. We judge that the main reason was that the holding Crucible subsidiary had good profits and increased profits and losses for minority shareholders.
Focus on the pan-semiconductor layout and the new growth curve of performance. The company continues to expand from photovoltaics to the semiconductor industry chain, with large card position silicon wafer equipment, advanced process equipment, components, etc., and the layout is gradually improving. At the same time, it also focuses on third-generation semiconductor development opportunities, focusing on silicon carbide substrate materials+epitaxial equipment, leading 8-inch technology. We expect the company's silicon carbide substrate production capacity to exceed 20,000 wafers per month in 24/25.
Profit forecasting and valuation
Taking into account Crucible's profitability or decline in 2024, we lowered 2024/2025 net profit 6.2%/12.6% to 5.569 billion yuan/6.664 billion yuan. The current stock price corresponds to the 2024/2025 price-earnings ratio of 7.4 times/6.2 times. Maintaining an outperforming industry rating, but due to the decline in the industry's valuation center, we lowered our target price by 20.4% to 43.00 yuan, which corresponds to 10.1 times the 2024 price-earnings ratio and 8.5 times the 2025 price-earnings ratio. There is 36.2% upside compared to the current stock price.
risks
There is a risk of technology iteration, and the downstream production expansion progress is lower than expected.