Revenue in 23 years was +44.64%, and the impact of impairment can be expected to be eliminated. Maintaining a “buy” rating, the company achieved revenue of 3,980 million yuan, +44.64% year over year, achieving net profit to mother of 214 million yuan, -14.70% year over year, lower than our expectations (265 million yuan), mainly due to rapid growth in the company's business scale and a large cumulative unsettled amount of short-term projects, leading to increased asset impairment. Among them, Q4 achieved revenue of 1,447 billion yuan, +86.46% year over year, and net profit to mother +3.70 million yuan % Considering the intensification of competition in the industry, gross margin may continue to be pressured, we adjusted the company's net profit to be 2.83/3.71/448 million yuan in 24-26 years (the value was 3.57/459 million yuan before 24-25 years ago), which is comparable to the company's 24 year Wind unanimously expected PE to be 17x. Considering that the company's leading domestic semiconductor customers cover a wide range, they are expected to fully benefit from accelerated localization, and have good asset quality and cash flow performance, give the company 24 x PE for 24 years, adjust the target price of 12.98 yuan (previous value 17.10 yuan) and maintain “Buy” rating.
Domestic substitution drove high revenue growth in the semiconductor industry. The overall gross margin declined due to market competition. The company's semiconductor and pan-semiconductor/new display/life sciences/food and drug health achieved revenue of 28.7/4.3/3.7/210 million yuan respectively, +139.5/-60.2/+13.9/+79.6pct, with gross margins of 11.2%/13.3%/13.8%/9.2%, year-on-year, and -3.3/-1.8/-3.1 pct, of which semiconductor and pan-semiconductor industry revenue Rapid growth, mainly benefiting from the acceleration of domestic semiconductor substitution. By product, clean room system integration/mechatronic process system/secondary distribution/design consulting achieved revenue of 22.9/11.5/5.3/0.1 billion yuan, +22.1%/+127.9%/+9.6% year-on-year, gross margin of 10.0%/12.9%/13.8%/32.1%, respectively, 3.8/+3.1/-7.0pct. The overall gross margin was -3.2pct to 11.4% yoy due to market competition.
The overall cost rate declined, and the impact of impairment due to the increase in short-term centralized construction contract assets increased the company's overall expense ratio by -1.11 pct to 2.77% year on year. Among them, the sales/management/R&D/finance expenses ratio was -0.01/-0.52/+0.07/-0.65 pct year on year. The company's initial listing raised capital was in place, and the amount of financial expenses incurred dropped sharply due to high deposit interest income. Total impairment expenses for the year accounted for +2.48 pct to 1.60% of revenue. The main reason was that revenue grew rapidly and the short-term unsettled amount of projects under construction was large, resulting in contract assets of +790 million yuan year over year and impairment accruals of +90 million yuan year over year. Net profit margin in '23 was 5.4%, -3.8pct year over year. The company's net cash flow from operating activities in '23 was 210 million, with a year-on-year decrease of inflows of $0.3 billion, which continued to match profits. The receivables and payout ratios were 86.9%/89.3%, respectively, and -0.2/-0.2pct year on year.
High growth in new orders in '23, with sufficient on-hand orders
The amount of new contracts signed in '23 was 4.95 billion, +48.2% year-on-year, and orders in hand at the end of the year were 2.87 billion yuan, +57.9% year-on-year.
This round of continuous investment in domestic semiconductor substitution and new OLED production line investment in the panel industry are boosting the downstream boom. In the context of a long-term manufacturing power, investment in high-tech industries is expected to maintain rapid growth, driving the continuous expansion of the clean room industry. As a leading domestic clean room system service provider, the company is expected to fully benefit.
Risk warning: The capital expenditure of the domestic semiconductor industry fell short of expectations; the gross margin of the semiconductor clean room engineering business declined more than expected; the company's new orders or conversions fell short of expectations.