Incident: The company released its 2023 annual report. In 2023, the company achieved revenue of 150 billion yuan, -16.80% year on year; net profit to mother was 171 million yuan, -17.18% year over year.
The recovery in industry sentiment fell short of expectations, putting pressure on the company's performance in '23. The company's performance was under pressure in 2023, mainly because sales prices for the company's rare gas products returned to normal in '23; compounded by weak demand for consumer electronics, etc., and a decline in the operating rate of downstream semiconductor factories, etc., which led to a decline in the company's electronic specialty gas business revenue and operating profit; in addition, interest expenses on convertible bonds increased due to the company's completion of the issuance of convertible bonds in '23, which had a certain impact on the company's profits. Looking at specific business segments, (1) Specialty Gases: Special gas revenue in 2023 was 1,023 billion yuan, -22.67% year-on-year, accounting for 68.16% of main business revenue. Due to the high gross margin of new products, the overall gross margin of specialty gases increased by 5.32pct to 36.21%. (2) General industrial gases: In 2023, ordinary industrial gas revenue was 227 million yuan, +3.11%, accounting for 15.13% of main business revenue, gross margin was 14.04%, +1.62pct year on year; (3) Equipment and engineering: 2023 equipment and engineering revenue was 201 million yuan, -13.98% year on year, gross margin was 9.88%, year-on-year.
Maintain technology research and development advantages and actively expand specialty gas categories. By the end of 2023, the company had achieved more than 55 imported substitution products, and successfully achieved customer coverage of more than 90% for domestic 8-inch or larger integrated circuit manufacturers. The company's leading product, photolithography, has passed ASML and GIGAPHOTON certifications, and is the only domestic gas company that has passed the two certifications.
The company's excimer laser gas products have also passed the 193nm test with Coherent (coherent) German company ExciStar lasers, further enhancing the company's recognition and popularity in the field of excimer laser gases. In 2023, the company launched 4 new electronic grade products, 1 gas mixture, 1 new fluorocarbon product, and 2 hydrides. The company actively promoted the extension of the industrial chain, laid out the entire industry chain of large single-product fluorocarbon and silicon-based products, and achieved key breakthroughs.
Highlight the advantages of regional layout coverage and promote international layout. The company uses convertible bonds to raise capital to build a production base in Jiangxi, and the company's customer coverage and specialty gas category will be greatly increased. The company set up a company in Thailand in 2022 to enhance customer recognition through the location advantages of overseas companies and the advantages of the company's specialty gas products. Currently, the company has increased its on-site gas production projects in Thailand to 3. In 2023, based on its original overseas customers, the company further strengthened its international layout, empowered the company's various products through acquired overseas companies, and obtained the certification of “3D NAND manufacturer” in Singapore. At the same time, in order to cover the Southeast Asian market more comprehensively, the company achieved connectivity in the Southeast Asian market by investing in Malaysian companies.
Profit forecast and investment suggestions: The company is a leading electronic specialty gas in China. It is actively expanding the specialty gas category, extending the industrial chain, continuing to develop and introduce new specialty gas varieties, and speeding up project base construction. Along with the recovery in downstream demand and the release of the company's new products, the company's performance is expected to grow further.
We predict that the company's net profit for 2024-2026 will be 232 million, 313 million, and 384 million, respectively, corresponding to the current PE of 23 times, 17 times, and 14 times, respectively, maintaining the “buy” rating.
Risk warning: downstream demand falls short of expectations, R&D falls short of expectations, fluctuating raw material prices, increased industry competition, etc.