Jacques Technology released its 2023 annual report and 2024 first quarter report. The company achieved operating income of 4.738 billion yuan in 2023, up 11.24% year on year; net profit to mother of 579 million yuan, up 10.43% year on year; gross margin was 31.33%, up 0.12 pct year on year; and net margin was 12.67%, a decrease of 0.13 pct year on year.

The company achieved operating income of 1,618 billion yuan in 2024Q1, up 51.09% year on year and 35.30% month on month; net profit to mother of 246 million yuan, up 42.21% year on year, up 148.68% month on month; deducted non-net profit of 239 million, up 55.67% year on year; gross margin was 30.50%, down 1.97 pcts year on year, up 0.77 pcts month on month; net margin was 15.47%, down 0.78 pcts year on year, up 7.28 pcts month on month. As the operating rate of fab and panel factories gradually recovers, the company's electronic materials business revenue performance is expected to continue to improve. The company focuses on the electronic materials, LNG insulation sheets, and flame retardants business sectors to continuously improve the professional business level and quality efficiency.

We have always paid attention to research and development, and the electronic materials business has made breakthrough progress. The company's electronic materials business has a wide variety of products, with a gross margin of 34% in 2023. The company's semiconductor precursor product technology is leading, and has become a supplier of precursor materials for many leading domestic and foreign semiconductor chip manufacturers such as Samsung Electronics, TSMC, and SMIC, and has basically achieved comprehensive coverage of a large 12-inch customer base. Furthermore, the company has stable shipments of silicon precursor products, and production capacity continues to rise. In terms of photoresist products, self-developed low-temperature photoresists for OLEDs and photoresists for advanced packaging have made breakthrough progress, and entered the client-side testing and introduction stage. The company has expanded the field of OCPS photoresists and continues to provide products and services to the world's leading panel manufacturers such as BOE and TCL Huaxing.

New electronic specialty gas and silicon powder products have been steadily verified and introduced. Comet, a subsidiary of Yaktech, specializes in the production of fluorine-containing specialty gases, and its electronic grade products have been successfully introduced into the supply systems of more semiconductor manufacturers and panel manufacturers. The subsidiary Huafei Electronics is engaged in silicon powder management. Its new products CCL and spherical alumina have begun stable supply to customers, and the development of high-end sub-micron spherical silica is progressing smoothly. Many subsidiaries' products have been continuously upgraded and improved, customers have been expanded, and a wider range of sales channels have been established to cooperate with the company to provide customers with comprehensive solutions.

LNG imports are growing at an accelerated pace, and the company's orders for LNG sheets are full. In the context of “carbon neutrality,” global LNG trade volume and China's LNG imports are growing at an accelerated pace, and orders for LNG carriers are full. LNG composite board is the core material for transport vessels, and the competitive landscape is excellent. As the first domestic manufacturer of LNG insulation panels certified by the French GTT Company and the Classification Society, the company has established cooperation with large domestic shipbuilders, has sufficient orders on hand, and long-term profitability has been steadily improving. The company's project to localize LNG storage using reinforced insulation composites has begun to bear fruit. The construction of the second insulation board plant has basically been completed, and large-scale production has already been carried out. The company has more than 40 patents, independently developed RSB and FSB secondary shielding materials, completed the construction of an intelligent production line and successfully carried out trial production, and the certification of related products is progressing smoothly by GTT.

Profit forecast and investment suggestions: We expect Yaktech to achieve revenue of 69.72/91.21/10.965 billion yuan in 2024-2026, respectively, and net profit of 10.61/15.51/2,029 billion yuan, corresponding to PE27/18/14x, maintaining a “highly recommended” rating.

Risk warning: Downstream demand falls short of expectations, progress in new product development and customer introduction falls short of expectations, and international trade frictions increase risks.