1Q24 results are basically in line with our expectations
The company announced 1Q24 results: revenue of 4.510 billion yuan, +25.28% year over year; net profit to mother of 1,070 billion yuan, +20.65% year over year; net profit after deduction of 1,102 billion yuan, +26.00% year over year, in line with our expectations.
Development trends
The gross margin performance was impressive, and contract debt remained basically flat from month to month. The 1Q24 company's gross profit margin was 43.52%, +2.91 ppt year over month. We believe that under the circumstances where the industry's operating rate in the first quarter was low and prices in the industry chain were under pressure, the company's gross margin increased month-on-month, which shows that the company's products are highly competitive. The company's contract debt at the end of 1Q24 was 1,028 billion yuan, and the company's contract debt at the end of 4Q23 was 1,072 billion yuan, which is basically the same from month to month. We believe this indicates that the company is still currently receiving sufficient orders.
Management expense ratios have increased, and minority shareholders' profits and losses have dragged down net profit. 1Q24 The company's sales/management/R&D/finance expense ratios were 0.5%/2.6%/6.6%/-0.2%, respectively, compared with +0.08/+0.29/ -1.53/+0.06ppt. The management expense ratio increased a lot. The company's quarterly report indicated that it was mainly an increase in salary and an increase in depreciation of fixed assets. The net interest rate of the 1Q24 company was 23.7%, -0.91ppt, which was mainly affected by 1Q24 minority shareholders' profit and loss of +117.8% year-on-year. We believe it was mainly due to the strong profits of the company's quartz crucible subsidiary.
Net operating cash flow was low, and both inventory and accounts receivable increased. 1Q24 The company's operating cash flow was 122 million yuan, a year-on-year period of -309 million yuan. The company's quarterly report indicated that it was mainly an increase in cash payments and various taxes paid to employees during the current period. 1Q24 inventory was +1,888 billion yuan year over year, and accounts receivable were +392 million yuan year over year. We believe this laid the foundation for the company's subsequent delivery and revenue recognition.
Focus on the overall layout of the company's pan-semiconductor business, which is expected to contribute to the second growth curve in performance. The company continues to expand from photovoltaics to the semiconductor industry chain, with large card position silicon wafer equipment, advanced process equipment, components, etc., and the layout is gradually improving. At the same time, it also focuses on third-generation semiconductor development opportunities, focusing on silicon carbide substrate materials+epitaxial equipment, leading 8-inch technology. We expect the company's silicon carbide substrate production capacity to exceed 10,000 pieces/month in 24 and 20,000 pieces/month in 25 years.
Profit forecasting and valuation
The profit forecast for 2024 and 2025 remains unchanged. The current stock price corresponds to the 2024/2025 price-earnings ratio of 7.1 times/5.8 times. Maintaining an outperforming industry rating, but due to the decline in the industry's valuation center, we lowered our target price by 14.0% to 37.00 yuan, which corresponds to 8.7 times the 2024 price-earnings ratio and 7.2 times the 2025 price-earnings ratio. There is 23.5% upside compared to the current stock price.
risks
There is a risk of technology iteration, and the downstream production expansion progress is lower than expected.