Net profit to the mother increased by 54.11% year on year, gross margin increased by 6.37 pct. On the evening of April 15, Jiemei Technology announced its 2023 annual report. In 2023, the company achieved revenue of 1,572 billion yuan, up 20.83% year on year, and net profit of 256 million yuan, up 54.11% year on year, gross profit margin 35.82%, up 29.45% in the previous period, up 6.37 pct. Q4 achieved revenue of 446 million yuan, a year-on-year increase of 44.37%, and realized net profit of 83 million yuan, an increase of 416.85% over the previous year. The growth rate in a single quarter was the highest since listing, indicating a marked recovery in the company's paper carrier business. Q4 gross margin was 35.95%, up about 9pct year over year.
The utilization rate of paper carrier tape rebounded, driving up the gross margin of the thin carrier tape business. According to the responses to investor questions published by the company on April 19 and investor interactive information such as the “Investor Relations Activity Record Form” published on October 25, 2023, the operating rate of the company's paper carrier business exceeded 60% in the first quarter of 2023, the operating rate of the paper carrier business in the second quarter was around 70%, and the operating rate of the paper carrier tape business reached 70% to 80% in the third quarter. Jiemei Technology said on the Shenzhen Stock Exchange Interactive Easy platform on April 19 that the company's operating rate for the second quarter of 2024 is expected to be around 80%, a significant improvement over the previous year. According to IDC data, global smartphone sales increased -0.1%, 8.5%, and 7.8% year-on-year in 2023Q3, 2023Q4, and 2024Q1, respectively. Global PC sales increased -7.6%, -2.7%, and 1.5% year-on-year in 2023Q3, 2023Q4, and 2024Q1 respectively. The recovery in consumer electronics has driven a continuous recovery in the company's order volume, thereby driving up the operating rate of the paper carrier tape business. The recovery in the paper carrier business contributed to an increase in the gross margin of the thin carrier business. The gross margin of the thin carrier tape business increased by about 7.5 pcts year-on-year in the second half of the year.
The MLCC release film has been successfully verified, and it is expected that it will be gradually released
The company continues to promote optical-grade BOPET film production projects. MLCC release film product verification for major Japanese and Korean customers is progressing smoothly. Among them, Murata is in the small-batch trial stage and is expected to gradually increase. Samsung's main testing process has basically been completed, and small-batch orders have been obtained. The next step is to seek to enter the gradual volume supply stage. Japanese and South Korean customers use the company's homemade base film release film for sample testing and small-batch trial, marking that the company is gradually beginning to achieve domestic replacement in the middle and high-end MLCC application fields of Japanese and Korean customers. At the same time, the company improved production process and product performance, and successfully developed MLCC release film products with low roughness and high-end polarizer release films. The equipment for the BOPET membrane phase II project has been scheduled. It is expected to be installed by the end of 2024, and the annual production capacity will more than double after completion and commissioning. 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 put into trial production at the end of 2023, and the second line is being installed.
Reduce costs and increase efficiency and improve profitability
The company seizes the industry adjustment window, continuously optimizes and improves the production environment, expands the paper carrier post-processing workshop in the Anji Electronics special base paper production plant, accelerates technology iteration, and builds an intelligent digital factory with a high purification level to achieve intensive production, adapt to the production requirements of miniaturized, automotive, and semiconductor carrier products, and further reduce manufacturing costs and logistics handling costs between electronics-specific base paper and post-processing processes.
Investment advice
Considering that the recovery in downstream smartphone demand is lower than our previous expectations, according to a Digitimes report on April 12, most businesses and research institutes at the beginning of the year predicted a smartphone growth rate of 5 to 10% for the whole year. Recently, it has been gradually reduced to around 5% or even lower. The recovery of the smartphone industry fell short of expectations or had an impact on demand for the paper carrier tape business. Due to changes in the underlying assumptions of profit forecasting, the profit forecast was revised. We lowered the company's net profit forecast for 2024/2025/2026 to 3.53/3.95/465 million yuan (previously the 2024/2025 net profit forecast was 417/545 million yuan), and adjusted the company rating from “buy” to “increase” rating accordingly. As of the close of trading on April 19, the current price corresponding PE was 24.1/21.6/ 18.3 times
Risk warning
MLCC release film volume fell short of expectations, consumer electronics recovery fell short of expectations, and paper carrier business growth fell short of expectations.