occurrences
On April 13, the company disclosed its 2023 annual report. In '23, the company achieved revenue of 1.50 billion yuan, -16.80%; realized net profit to mother of 171 million yuan, -17.18% year-on-year; and realized net profit after deduction of 161 million yuan, or -20% year-on-year.
Key points of investment
Changes in the price of rare gas raw materials in '23 affected specialty gas revenue. In '23, the company achieved revenue of 1.50 billion yuan, -16.80% year-on-year. Looking at the main business by industry, the company's special gas/ general industrial gas/ equipment and engineering achieved revenue of 1,023/2.27/ 210 million yuan respectively in '23, or -22.67%/+3.11%/-13.98% compared with the same period last year. TECHCET estimates that the global electronic specialty gas market will be about US$5.1 billion in '23, with a year-on-year growth rate of only 1.98%, down 8.22% from '22. The sharp rise in the price of rare gas raw materials in '22 led to a rise in the company's product prices and revenue. In '23, the sales price and revenue of the company's rare gas products declined; at the same time, due to poor demand for consumer electronics and the decline in the operating rate of downstream semiconductor factories, etc., the company's electronic specialty gas business revenue and operating profit declined in '23. In '23, the company achieved net profit of 171 million yuan, -17.18% year-on-year; realized net profit withheld from non-mother of 161 million yuan, -20% year-on-year. Due to the completion of the issuance of convertible bonds during the 23-year reporting period, the company increased interest expenses on convertible bonds, which also had a certain impact on the company's profits.
The introduction of new specialty gas products and products from the entire industry chain led to an increase in gross margin. In '23, the company achieved a gross profit margin of 30.59%. By industry, in '23, the company's specialty gas/general industrial gas/ equipment and engineering achieved gross profit margins of 36.21%/14.04%/9.88%, compared to +5.32pct/+1.62pct/ -2.70pct. The increase in overall gross margin was mainly driven by exports, the launch of new domestic specialty gas products, and product launches throughout the industry chain. In terms of gross margin, for domestic business, the company's general industrial gas business differs from specialty gases due to downstream uses, competitive patterns, product added value, etc.; specialty gases have high gross margins due to characteristics such as customization, high added value, and strong customer stickiness. For overseas business, customers are mainly professional gas companies, which need to enter internationally renowned semiconductor manufacturers through their sales channels. The gross margin of their products is slightly lower than that of domestic direct sales products. At the same time, the company also optimizes the overseas sales model through overseas layout to further enhance the direct supply ratio and profitability.
Continue to develop advanced process products and continuously consolidate the first-mover advantage strategy for introducing new products into the market. Germanium, a product of the entire industry chain developed independently by the company, has passed the certification and generated orders for the 5nm process production line of the largest memory company in Korea. The company's products have been supplied in batches to 28nm, 14nm, 7nm, etc., and some of the company's fluorocarbon products and hydrides have been used in 5nm advanced processes and are continuously expanding coverage.
During the 23-year reporting period, the company's excimer laser gas products passed the 193nm test of the Coherent (coherent) German company ExciStar lasers, further increasing the company's recognition and popularity in the field of excimer laser gases. Currently, on the one hand, the company focuses on the development of multiple categories of mature process application products to enrich the number of categories; on the other hand, it focuses on continuous research and development of mature processes to advanced process product applications, maintaining the competitive advantage of the company's products through a combination of the two aspects. At the same time, the company's silicon-based series of products (containing silicon-based precursors) and the new fluorocarbon products launched (mainly used in 3D NAND etching and dry processes for KrF laser-sharp etching of semiconductor capacitor graphics), which are used in electronic specialty gases with high usage and high profitability, and are developed and supplied throughout the entire industry chain to help improve profitability.
Investment advice
We expect the company to achieve revenue of 19.41/24.18/3.03 billion yuan in 2024/2025/2026, respectively, and achieve net profit of 2.32/3.17/419 billion yuan respectively. The current stock price corresponding to 2024/2025/2026 PE is 23/17/13 times, respectively, covering for the first time and giving it a “buy” rating.
Risk warning
Risk of technological change, product upgrading or increased competition; risk of price fluctuations of major raw materials; risk of price fluctuations of major products; risk of product quality risk; risk of production safety; risk of bad accounts receivable; risk of large inventory size; risk of exchange rate changes; risk of impairment of goodwill; risk of industrial policy and environmental regulation; risk of global economic downturn.