Description of the event
Recently, Xing Sen Technology released the 2023 Annual Report and the 2024 First Quarter Report.
In 2023, the company achieved revenue of 5.360 billion yuan, up 0.11% year on year; net profit to mother was 211 million yuan, down 59.82% year on year; deducted non-net profit of 0.48 million yuan, down 87.92% year on year; gross margin was 23.32%, down 5.34 pct year on year; net interest rate to mother was 3.94%, down 5.88pct year on year; after deducting non-net interest rate of 0.90%, down 6.48 pct year on year.
2024Q1 achieved revenue of 1,388 billion yuan, up 10.92% year on year; net profit of 0.25 million yuan, up 230.82% year on year; deducted non-net profit of 0.24 million yuan, up 2500.78% year on year; gross margin was 17.07%, down 7.08pct year on year; net profit margin 1.79%, up 1.19 pct year on year; net profit margin was 1.79%, up 1.65 pct year on year.
Incident comments
There was a slight increase in the PCB business, and continued investment in the packaging substrate business. By business, the company's revenue for PCBs, semiconductor test boards, and IC packaging substrates in 2023 was 4.09 billion yuan, 1.09 billion yuan, and 180 million yuan respectively, with year-on-year growth rates of 1.50%, -5.45%, and 4.78%, respectively; gross margins were 28.72%, 17.95%, and -11.83%, respectively. The year-on-year changes were -1.57pct, -3.05pct, and -26.58pct, respectively. In terms of the PCB business, the overall industry is facing the double pressure of weak demand and increased competition. In addition, Beijing Xingfei was included in the company's consolidated report in July 2023, benefiting from the restorative growth and share increase in the high-end mobile phone business of strategic customers, contributing 389 million yuan in revenue during the consolidated reporting period. In the packaging substrate business, CSP packaging substrates contributed the main revenue, and FCBGA packaging substrate business revenue has not yet entered mass production. The decline in gross margin is mainly due to the FCBGA packaging substrate project being in the customer certification and trial production stage. Labor, depreciation, Energy and material costs are high.
Some of the company's major customers in the Zhuhai FCBGA packaging substrate project have passed the factory's technical ratings, system certification, and product reliability verification. Currently, the yield of low-layer boards has increased to 90% and the yield of high-rise boards has increased to more than 85%. The Zhuhai factory already has small sample order revenue, which is relatively small. It is expected that small-batch mass production will begin in the second quarter. The company expects product yield to reach the same level as leading overseas companies by the end of 2024. The Guangzhou FCBGA packaging substrate project passed the factory technical rating in mid-March. It is planned to complete the system rating in early May and then carry out product certification. It is expected that the product certification will be completed and mass production will begin around the end of August, about a month earlier than the original plan. By the end of March 2024, the company's FCBGA packaging substrate project had accumulated investment of 3 billion yuan, and it will continue to invest in the future.
The cornerstone business continued to improve, and the baseboard business became the second growth curve. The company continues to promote PCB product upgrades and breakthroughs in strategic customers, and achieve improvements in indicators such as delivery, yield, and operating efficiency. Product profitability may continue to improve. In terms of semiconductor business, the company's packaging substrate business has established cooperative relationships with mainstream customers at home and abroad. With the gradual implementation of new production capacity, it will fully enjoy the dividends of the industry's boom, and packaging substrates are also expected to become a new growth pole for the company in the future. The company's net profit for 2024-2026 is estimated to be 326/514/728 million yuan, respectively. Corresponding to the current share price PE is 62x/39x/28x, respectively, maintaining a “buy” rating.
Risk warning
1. There is uncertainty about the demand in the PCB industry;
2. There is uncertainty about the expansion of the packaging substrate business.