Revenue growth rate is impressive, maintaining a “buy” rating

In '23, the company achieved revenue of 3.24 billion yuan, +88.4% year on year, net profit of 190 million, +38.7% year on year; 23Q4 achieved revenue of 860 million yuan, +21.9% year on year, and net profit to mother of 0.3 billion yuan, or -51.68% year over year. We believe this is mainly due to the decline in Q4 gross margin and an increase of 0.18 million in R&D expenses over the same period last year. 24Q1 achieved revenue of 658 million, +14.2% year over year, and net profit to mother of 39 million, +14.23% year over year. The company plans a cash dividend of $19 million (tax included) for 23 years, with a dividend ratio of 10%. The company announced a shareholder return plan for 2023-2025. The cash dividend for the last three years is not less than 30% of the annual profit distribution. Considering that the chemical industry is greatly affected by cyclical economic fluctuations, we lowered the company's profit forecast. It is estimated that the company will achieve net profit of 2.4, 3.1, and 380 million yuan in 24-26 years (the previous value was 350 million yuan and 480 million yuan). Referring to the average PE of comparable companies, we approved giving the company 20 times PE in 24 years, with a corresponding target price of 10.71 yuan, maintaining a “buy” rating.

Gross margin is under pressure. The proposed expansion base is expected to increase module manufacturing capacity by business. The company's industrial module design and manufacturing and engineering services achieved revenue of 4.9 billion and 2.74 billion, +27.51% and +106.70%, gross margins of 26.04% and 12.29% year-on-year changes of +5.94pct and -7.08pct year-on-year. The consolidated gross margin was 14.5%, -5.27pct, 23Q4 and 24Q1 respectively, down 7.83pct. 2.80pct. We determine that gross profit is under pressure due to the decline in the proportion of modularity. The company plans to raise 750 million yuan through the issuance of convertible bonds for the Nantong Libert Heavy Industry Project (total investment of 1.29 billion yuan). The project is close to the Yangtze River entrance, and the production base covers an area of about 470000 square meters. After completion, it may enhance the company's manufacturing capacity for multiple modules simultaneously.

The cost ratio was effectively diluted during the period, and the net interest rate declined slightly

The company's expense ratio for the 23-year period was 6.3%, a year-on-year decrease of 3 pct. The sales, management, R&D, and finance cost ratios changed -0.45, -2.61, +0.28, and -0.18 pct, respectively. The cost control effect was good. Asset and credit impairment losses in '23 were $03 million, an increase of $09 million over the previous year. Under the combined impact, net interest rate in '23 fell 2.10pct to 5.87%. The net amount of CFO in '23 was 351 million, with a year-on-year decrease of 68 million dollars. The current payout ratios were 95.3% and 73.9%, respectively, with year-on-year changes of -48.6pct and -27.2pct.

Pioneering a new map of new high-end optical materials, signing a major contract of 650 million. In December 23, the company and Tuoxene Technology reached a strategic cooperative relationship. The two sides will further deepen cooperation to jointly promote new products, and Tuoxene Technology will complete production of TAMT? Tomite? The SOOC series of products was authorized for exclusive distribution by Libert, which enabled all-round cooperation between the two parties, broadened marketing channels for Topene Technology, and opened up a new business landscape for the company. In January '24, the company signed two EPFC contracts with Zhejiang Tuofen Optical New Materials Co., Ltd., with a total contract amount (provisional) of 650 million (tax included).

This is the first time that the company has applied modular construction methods to high-end optical new material projects, which helps the company accumulate modular construction experience in high-end optical new material projects.

Risk warning: raw material procurement prices rise; SOOC product sales fall short of expectations; market expansion falls short of expectations; management risks brought about by the expansion of business scale.