Incident: The company released its 2023 annual report. In 2023, the company achieved revenue of 2,667 billion yuan, -2.00% year-on-year, and net profit to mother of 222 million yuan, or -43.08% year-on-year.
Annual performance was under pressure, and the product layout was further improved. Due to the impact of the production capacity of some downstream customers in 2023, and the unprofitable impact of the new product expansion layout, the company's business performance declined year-on-year in 2023. Specifically: (1) the company continued to increase its R&D investment in new semiconductor innovative materials projects, etc., affecting net profit falling by about 31.39 million yuan year on year; (2) the construction of the company's Xiantao Industrial Park affected the increase in bank loan interest expenses and the year-on-year decline in exchange exchange income due to exchange rate fluctuations; (3) due to the year-on-year decline in long-term equity investment income calculated by participating companies in accordance with the equity law; (4) due to Qijie Technology's implementation of employee shareholding plans, which affected changes in equity changes and confirmed equity incentive costs, and intermediary expenses due to Beihai Xunji's new third board listing. In the future, as the company's product structure is further optimized and the polishing liquid business continues to expand, the company's performance is expected to pick up.
Q4 polishing pad revenue hit a new high in a single quarter, and the amount of polishing liquid was released quickly. By business: (1) Polishing pads: In 2023, the CMP polishing pad business achieved product sales revenue of 418 million yuan, a year-on-year decrease of 8.65%; however, the fourth quarter achieved product sales revenue of 149 million yuan, an increase of 26% over the previous quarter, a record high in revenue in a single quarter. The company's polishing pad business showed a clear recovery trend from quarter to quarter.
(2) Polishing liquid and cleaning liquid: In 2023, sales revenue was 77 million yuan, up 331% year on year; of these, sales revenue was 28.9 million yuan in the fourth quarter, up 33% month-on-month and 295% year-on-year. The company quickly dispenses the amount of polishing liquid and cleaning liquid. (3) Display materials: In 2023, sales revenue of semiconductor display materials was 174 million yuan, up 268% year on year; of these, sales revenue of 67 million yuan was achieved in the fourth quarter, up 17% month on month and 175% year on year. The company has become the first supplier of YPI and PSPI products for some mainstream panel customers in China. The system capacity for large-scale production continues to improve, and display materials have entered the accelerated release stage.
New business is progressing rapidly, and customer verification is progressing smoothly. (1) Polishing pads: In terms of polishing hard pads, the coverage of domestic logic fab manufacturing nodes has been further expanded, and related new models of products have been ordered in batches; in terms of polishing pads, several soft pad products at the Qianjiang factory have been sold in batches, and production has entered the climbing stage; (2) Polishing liquid and cleaning solution: The market promotion of all process products continues, and the demand for dielectric layer polishing liquid continues to grow, and polysilicon polishing liquid has entered the domestic mainstream customer supply chain; the metal gate polishing liquid has been successfully introduced into the customer supply chain; copper and blocking layer polishing liquids have begun to be verified and oxidized in mainstream domestic customer production lines Cerium polishing liquid continues to be developed to achieve further breakthroughs in 2024; (3) Display materials:
New semiconductor display materials such as fluorine-free photosensitive polyimide, black pixel defining layer materials, and low dielectric materials for thin film packaging are being developed and sampled according to the plan. The film packaging material TFE-INK has passed the certification of major downstream customers, introduced customers in the fourth quarter, and obtained batch orders. (5) Wafer photoresists: Currently, 16 domestic mainstream wafer photoresists have been deployed, including 8 high-end KrF photoresists and 8 submerged ArF photoresists. Customer samples for 7 products have been completed, and the rest of the products are scheduled to be sampled by customers in 2024. (6) Advanced packaging materials: In terms of semiconductor packaging PI, 7 products have been deployed, covering non-photosensitive PI, positive PSPI, and negative PSPI, and 5 samples have been sent to complete the verification and start introduction of some products within 2024. The verification and mass production introduction of temporary bonding adhesive products to a mainstream domestic integrated circuit manufacturing client has basically been completed. In addition, more than three fabs and packaging factories have completed technical docking.
Profit forecast and investment suggestions: The company is building a semiconductor material platform enterprise. As the company's polishing pad business continues to advance and new products such as polishing liquid and display materials are rapidly released, the company's performance is expected to grow further. We predict that the company's net profit for 2024-2026 will be 414 million, 605 million, and 866 million, respectively, corresponding to the current PE of 47 times, 32 times, and 22 times, respectively. We continue to be optimistic about the company's long-term development and maintain a “buy” rating.
Risk warning: downstream demand falls short of expectations, project commissioning schedule falls short of expectations, customer verification falls short of expectations, market competition intensifies, etc.