Matters:

The company released its 2023 annual report, achieving operating income of 517 million yuan, an increase of 12.73% over the previous year, and a net profit of 122 million yuan to mother, an increase of 8.16% over the previous year. The company plans to distribute a cash dividend of 8 yuan (tax included) to all shareholders for every 10 shares, and use the capital reserve fund to transfer 4 shares for every 10 shares to all shareholders.

Ping An's point of view:

There was a slight increase in performance, and the organic light-emitting materials business performed excellently. The company is deeply involved in the OLED market segment. In 2023, it achieved operating income of 517 million yuan, a year-on-year increase of 12.73%, achieved a comprehensive gross profit margin of 56.46%, achieved net profit due to mother of 122 million yuan, an increase of 8.16% over the previous year, and realized net profit after deduction of 76 million yuan, a year-on-year decrease of 5.31%. By business category, the company's organic light-emitting materials achieved revenue of 318 million yuan, an increase of 49.42% over the previous year. The light-emitting materials business has become It is the main source of the company's revenue, and also contributed a major growth point to the company's performance.

The company's in-depth layout of OLED light-emitting materials, packaging materials, PSPI materials, etc., has achieved great results. Future expansion of the downstream OLED application field is expected to generate considerable incremental demand for materials.

Currently, the penetration rate of OLED in mobile phones continues to increase, and the expansion into medium-sized IT and other scenarios is more certain, and there is considerable room for growth. Demand for upstream materials will grow over a long period of time, which is beneficial to the company's materials business. In terms of organic light-emitting materials, in 2023, the company completed the introduction of G', R', and B' materials in production lines and achieved stable supply. Red and green light-emitting layer materials have passed customer verification, and some materials have already been verified. In addition, packaging materials are stably supplied to production lines, while PSPI materials have passed mass production tests by some customers to achieve batch supply. The company has a comprehensive layout in terms of materials and rich product categories. Under the trend of gradual increase in downstream demand, it is expected to contribute to a continuous and steady increase in the company's performance in the future.

Continuing to explore the G6 evaporation source market, the construction of high-generation OLED production lines is expected to generate new demand. The company has a strong leading edge in the evaporation source segment, fully exploiting the G6 production line evaporation source market. During the reporting period, the subsidiary Shanghai Shengyi completed contract signing for the Xiamen Tianma Phase II and Chongqing BOE Phase III additional evaporation source projects, and completed the inspection work for the Xiamen Tianma Phase I and Chongqing BOE Phase III evaporation source projects as planned. In terms of high-generation OLED production lines, according to the company's annual report, BOE has officially started construction of the first G8.6 AMOLED production line in China with an investment of 63 billion yuan. Panel manufacturers such as Vicino said they will carefully promote high-generation production line projects according to market demand and company development plans. The high-generation line is gradually becoming a new expansion focus for the OLED industry, and the company's layout in terms of high-generation evaporation sources is quite forward-looking. Technology development and reserves for G8.5 (G8.6) high-generation evaporation sources have been carried out. The development of high-generation evaporation sources is currently underway. testing, It is expected to benefit from the development trend of higher generation OLED production lines.

Investment advice: The company is a leading manufacturer of materials and equipment for the upstream OLED circuit. The product range is comprehensive and highly competitive. As the OLED industry further expands, new demand for the company's materials and equipment is expected. Based on the company's 2023 performance and judgment on industry trends, we adjusted the company's performance forecast. The company's net profit for 2024-2026 is expected to be 189 million yuan (previous value: 221 million yuan), 270 million yuan (previous value: 337 million yuan), and 396 million yuan (new), corresponding to the closing price on April 18, 2024. The company's PE in 2024-2026 will be 23.2X, 16.2X, and 11.1X, respectively. The company's fundamentals are good, the competitive advantage is obvious, the growth potential is considerable, and the company's “recommended” rating is maintained .

Risk warning: (1) Risk that the company's technological innovation falls short of expectations: The pace of upgrading and iteration of display panels is fast. If the company's technological innovation and development speed cannot meet market demand in a timely manner, it may cause the company's market share to gradually shrink. (2) Risk that downstream demand falls short of expectations: The downstream application of the company's products is concentrated in the OLED industry. If the OLED industry slows down or is penetrated by other technologies, it may lead to weak growth in the company's performance. (3) Evaporation sources only apply to Tokki's risk: the company's evaporation source products are only suitable for Tokki evaporators. If Tokki chooses other suppliers for its own evaporation source or downstream panel factory, it may lead to a sharp drop in market demand for the company's evaporation source products.