Incident: On April 15, 2024, the company released its 2023 annual report, achieving full-year revenue of 1,572 billion yuan, +20.83%; net profit to mother of 256 million yuan, +54.11% year over year; net profit after deducting non-return to mother of 255 million yuan, +73.18% year over year.
Full year results are in line with expectations. On a quarterly basis, 23Q4 achieved revenue of 446 million yuan, +44.37% year over month; net profit to mother of 83 million yuan, +416.85% year on year, +15.28% month on month; after deducting non-net profit of 84 million yuan, +1674.40% year on year, and +17.03% month on month.
Gross margin declined year-on-year, and cost control capabilities continued to be optimized. 1) Gross profit margin: The company's gross margin in 2023 was 35.82%, +6.37pct year-on-year. Among them, 23Q4 gross margin was 35.95%, +9.01pct year over year, and -4.25pct month-on-month. The year-on-year increase in gross margin was mainly due to a recovery in downstream demand, and the company's operating rate reduced the cost of repairing and superimposing raw materials. 2) Period expenses: The company's expenses rate for the 2023 period was 15.91%, -1.19 pct year on year. Among them, sales, management, R&D, and finance expenses were 2.06%, 8.77%, 5.89%, and -0.81%, respectively, -0.62, -1.55, -1.26, and +2.24pct year-on-year, respectively.
High-end release films are progressing smoothly, creating a second growth curve. The company's MLCC release film has achieved stable batch supply to major customers such as Guoju, Huaxinke, Fenghua Hi-Tech, and Sanhuan Group, while progressing smoothly for major Korean and Japanese customers. Among them, Japanese customer Murata is in the small-batch trial phase and is expected to gradually increase; Korean customer Samsung has basically completed the main testing process and has already obtained small-batch orders. The next step is to enter the gradual volume supply stage, which is expected to become the company's second growth curve. In addition, based on the company's development plan, taking into account new changes in the market, customer needs, and the company's product and business layout, the company increased the release film production capacity of the South China industrial research headquarters project, the Zhaoqing production base in Guangdong, from the original planned annual production capacity of 100 million square meters to an annual production capacity of 200 million square meters. The first line of these was already in trial production at the end of 2023, and the second line is being installed. Once production capacity is released, it is expected to further contribute to the increase in performance.
Profit forecast: We expect net profit due to mother for 2024-26 to be $348, 4.61, and 596 million yuan, respectively, maintaining a “buy” rating.
Risk warning: Downstream demand recovery falls short of expectations; risk of new business expansion falling short of expectations; risk of release of new production capacity falling short of expectations; risk of price fluctuations of major raw materials.