The company's R&D expenses increased 20% year over year in 2023. The company achieved operating income of 2,667 billion yuan (YoY -2.0%), net profit to mother of 222 million yuan (YoY -43.1%), and gross profit margin of 36.95% (YoY-1.14pct) in 2023. 4Q23 revenue of $795 million (YoY +3.7%, QoQ +11.4%), net profit to mother of $46 million (YoY -52.0%, QoQ -43.1%). In 2023, the company's semiconductor business achieved revenue of 857 million yuan, an increase of 18.82% over the previous year, accounting for 32% of total revenue. In 2023, the company continued to increase R&D investment in new semiconductor innovative materials projects, and R&D expenses increased 20% to 380 million yuan over the same period last year.
4Q23 CMP polishing pad revenue reached a record high, and the CMP polishing liquid and cleaning liquid business increased rapidly. In 2023, the company's CMP polishing pad business achieved revenue of 418 million yuan, a year-on-year decrease of 8.65%, and 4Q23 CMP polishing pad business revenue of 149 million yuan (YoY +49.21%, QoQ +25.68%). Revenue in a single quarter reached a record high, showing a quarterly recovery trend. In 2023, the CMP polishing liquid and cleaning liquid business achieved revenue of 77 million yuan, an increase of 331% over the previous year. 4Q23 CMP polishing liquid and cleaning liquid business revenue of 28.9 million yuan (YoY +294.61%, QoQ +32.96%), entering the rapid growth phase.
Display materials revenue increased 268% year-on-year in 2023, becoming the number one supplier of YPI and PSPI for some customers.
In 2023, the company showed material sales revenue of 174 million yuan, up 267.82% year on year, and 4Q23 sales revenue of 66.73 million yuan (YoY +174.86%, QoQ +17.46%), showing a stable volume trend. The company has become the first supplier of yellow polyimide paste YPI and photosensitive polyimide PSPI products for some mainstream domestic panel customers. The film packaging material TFE-INK has passed the certification of major downstream customers, introduced customers and obtained batch orders in the fourth quarter.
The semiconductor advanced packaging materials business verification is progressing smoothly. In terms of semiconductor packaging PI, the company has deployed 7 products, fully covering non-photosensitive PI, positive PSPI, and negative PSPI. Samples of 5 products have been sent, and the customer side covers front-end fabs and back-end packaging companies. The company aims to complete some product verification and begin introduction within 2024. In terms of temporary bonding adhesive products, the company has basically completed the verification and mass production introduction of a mainstream integrated circuit manufacturing client in China. More than three fabs and packaging plants have completed technical docking, the industrial construction of temporary bonding adhesives has been completed, the core raw materials are autonomous and controllable, and mass production and supply capabilities are available.
Investment advice: We expect the company's 2024-2026 revenue to increase 22.8%/15.4%/13.5% year on year to 32.76/37.82/4.292 billion yuan (previous value: 39.16/4.568 billion yuan in 2024-2025), and net profit to mother will increase 99.7%/35.6%/22.2% year on year to 443/6.01/734 billion yuan (previous value:
2024-2025 was 7010/913 million yuan), corresponding to 2024-2026 PE was 44.2/32.6/26.7 times, maintaining a “buy” rating.
Risk warning: Downstream demand falls short of expectations; new business development falls short of expectations.