2023 and 1Q24 results are in line with our expectations
The company announced its 2023 and 1Q24 results: 2023 revenue of 1,609 million yuan, net profit to mother of 461 million yuan, +12.2% year on year; 4Q23 revenue of 457 million yuan, +68.4% year on year; net profit to mother of 122 million yuan, +62.7% year on year. 1Q24 revenue was 450 million yuan, +29.6% year on year, and net profit to mother was 135 million yuan, +44.5% year over year. The results were in line with our expectations.
Ongoing orders were plentiful, and confirmed orders from TopCon and BC led to 1Q24 performance growth. The company's contract liabilities and inventory were high. As of the end of the first quarter of '24, the company's contract liabilities were 1,971 billion yuan, up 120.42% year on year, and inventory was 2,014 billion yuan, up 86.32% year on year, highlighting the company's many new orders.
In 2023, TopCon added production expansion and rapid introduction of technology such as SE and LIF. We determine that large-scale production expansion began in the second half of '23 and the revenue confirmation period began in the fourth quarter; after a period of debugging, BC battery orders will also move towards the confirmation period.
Profitability of 1Q24 showed a year-on-month recovery, and R&D investment continued to increase. 1Q24 achieved a gross profit margin of 48.7% and a net profit margin of 30.0%, up 1.6 ppt/3.1 ppt year over year, and 1.3 ppt/3.4 ppt, respectively. Profitability improved, showing that the company still has leading technical strength in the field of new technology. Looking ahead to 24 years, we expect the company's profitability to pick up further as new technology is applied. 1Q24's sales/management/R&D/finance expense ratios were -0.4pp/ -0.48pp/ +2.98pp/ -0.46ppt, respectively. The increase in R&D expenses was mainly due to the increase in salary due to investment in R&D of new products and new processes and the increase in R&D personnel.
Development trends
A number of technological breakthroughs have been achieved, and we look forward to the release of performance. According to the company's announcement, laser-induced sintering (LIF) increased by more than 0.2%, and the cumulative production capacity has exceeded 100 GW; laser-induced annealing (LIA) has received orders from European customers; BC battery laser equipment has been planned to expand production in 24 years; TGV laser microporous equipment enables micro-hole and micro-slot processing of glass substrates, opening up space in semiconductor chip packaging and display chip packaging.
Profit forecasting and valuation
We kept our 2024 profit forecast of 637 million yuan unchanged and introduced a 2025 profit forecast of 844 million yuan. The current stock price corresponding to 2024/2025 P/E is 17.5x/13.2x, respectively. Considering the decline in the industry's valuation center, we lowered our target price by 26% to 52.49 yuan, corresponding to the 2024/25 target P/E of 22.5x/17.0x, a potential increase of 29%, maintaining the outperforming industry rating.
risks
New technology iterations have been slower than expected; the competitive landscape worsens as new entrants enter.