Description of the event
The company released its 2023 annual report: in 2023, it achieved revenue of 5,010 billion yuan, an increase of 6.17% year on year; attributable net profit of 107 million yuan, a year-on-year decrease of 24.37%; after deducting non-vested net profit of -52 million yuan, a year-on-year decrease of 2427.29%.
Equivalent to 2023Q4 revenue of 660 million yuan, a year-on-year decrease of 16.66%; attributable net profit of 0.11 million yuan, an increase of 71.39%; deducted non-attributable net profit of -59 million yuan, a year-on-year decrease of 33.4%.
Incident comments
Revenue increased throughout the year, putting pressure on profits. The company's revenue in 2023 increased 6.17%, and net profit fell 24.37%. By business sector: 1) Display Materials achieved operating income of 3.27 billion yuan, an increase of 4.71% over the previous year. The sector was greatly affected by weak demand in the consumer electronics market; 2) Applied Materials achieved revenue of 1.58 billion yuan, an increase of 9.53% over the previous year. In terms of profitability, the current period achieved a gross profit margin of 13.3%, a year-on-year decrease of 3.8 pcts. By product, the gross margin of materials decreased by 2.38 pcts, and applied materials decreased by 9.5 pcts. The rate for the period was 12.2%, down 1.8 pcts, of which the financial rate decreased by 1.3 million pcts; other income increased by 67 million pcts; investment income increased by 12 million yuan; asset impairment losses decreased by 27 million yuan; in addition, increased bad debt accrued credit impairment losses increased by 70 million yuan in the current period; ultimately realized net profit of 107 million yuan, a decrease of 24.37% year on year; after deducting unvested net profit of -52 million, a year-on-year decrease of 2427.29%.
Q4 Single quarter operations are under pressure. Q4 revenue also fell by 16.7%, which is expected to be dragged down by weak consumer electronics demand, and applied materials will also be affected. Q4 gross profit margin was 16.7%, down 3.9 pcts year on year; rate for the Q4 period was 24.2%, down 1.7 pcts year on year; of which management and R&D rates decreased by 1.0 and 0.8 pcts, sales rates increased 0.2 pcts; Q4 other income increased 84 million year over year; credit impairment losses increased 63 million year over year; asset impairment losses decreased by 27 million yuan; final attributable net profit increased by 71.39%; after deducting unvested net profit - 59 million, down 33.4 pcts year on year %.
Applied materials continue to break through. The company's spherical materials are in strong market demand in the fields of copper clad plates, packaging materials, and new energy batteries, and sales increased 85% year over year; nano zirconia has been introduced into many leading ternary lithium battery companies in the new energy field, and the products have been widely used; high-purity ultrafine spherical silicon dioxide and polishing liquid for semiconductor packaging have been verified by domestic and foreign customers; polishing powder has a market share of over 40% in the LCD industry; and the construction of synthetic high-purity quartz sand production lines is also underway.
Display materials continue to enhance the advantages of the industrial chain. UTG has entered a “rising period” in the industry, showing that modules are developing “big customers” in the market.
The UTG Phase II project plant has been completed and has a production capacity scale. It has introduced many customer resource pools such as well-known downstream panel companies and terminal manufacturers. At the same time, it is also actively exploring layouts in cutting-edge fields such as in-vehicle displays, large-screen curved displays, and smart wearables. The display module successfully entered the supply chain of international “big customers” such as LGD and Samsung, accelerated the AG glass project, increased business expansion efforts in automotive projects and segments such as IOT, central control, and medical care, and achieved penetration of the LED display business into the transportation industry.
Investment advice: Expecting the expansion of the company's new materials business category and the release of UTG covers, it is estimated that in 2024 and 2025, net profit of 240 or 320 million, corresponding to PE 42 or 31 times, will maintain the purchase rating.
Risk warning
1. Demand for consumer electronics continues to be sluggish;
2. Low expectations for the new material production line to be put into operation.