Net profit of 110 million yuan returned to mother in '23, maintaining the “increase in holdings” rating

Feikai Materials released its annual report for the year 23 on April 28. In 2023, it achieved revenue of 2.73 billion yuan (yoy -6%), net profit of 110 million yuan (yoy -74%), and deducted non-net profit of 50 million yuan (yoy -89%). Of these, net profit for 23Q4 was 100 million yuan (YOY -186%, QoQ -372%). 24Q1 revenue was 670 million yuan, +11% year over year, and net profit to mother was 60 million yuan, -17% year over year. The company plans to distribute a cash dividend of 0.8 yuan (tax included) for every 10 shares. We expect the company's net profit to be 366/4.23/481 million yuan in 2024-2026, respectively, and the corresponding EPS of 0.69/0.80/0.91 yuan, respectively. Comparatively, the company's 24-year Wind unanimously expected an average PE value of 14 times. Considering the company's layout in the semiconductor materials field and the growth of construction projects, the company was given 18 times PE in 24 years, with a target price of 12.42 yuan, maintaining an “increase” rating.

Downstream demand is weak. The company's comprehensive gross margin yoy-4.9pct to 34.5% screen display materials sector in 23 years achieved revenue +5% YoY to 1.28 billion yuan, gross margin -2.9pct to 36.7% YoY; UV curing materials sector, downstream demand in the optical communications industry was poor. The company's new merger with Runao Chemical achieved revenue of -4% YoY to 640 million yuan, gross margin +2.9pct to 33.8%; semiconductor materials sector, achieving revenue +3% to 570 million yuan YoY, gross margin + 1.8 pct to 38.0%. The annual comprehensive gross margin yoy-4.9pct to 34.5%, and the periodical expense ratio yoy+3.5pct to 24.9%. 23Q4 comprehensive gross margin was -9.1/-7.3pct to 30.1% year over month, and net margin was -31.2pct to -13.9% year over year, mainly due to impairment reserves of 150 million yuan. 24Q1 consolidated gross margin -3.4/+5.4pct to 35.5% year-on-month, and net margin -2.7pct to 10.0% yoy.

The company's new projects are progressing in an orderly manner, and the performance is expected to continue to grow

According to the 23 annual report, the company's cholesteric electronic paper LCD and Piless LCD have been verified by clients, and i-Line photoresist and 248nm photoresist anti-reflective layer materials have been mass-produced by some customers. The company actively promoted the revised fund-raising projects “50-ton high-performance hybrid LCD and 200-ton high-purity electronic display monomer material project” and the “acrylic ester and photoresist product upgrade construction project”. At the same time, the 5000t/ATFT-LCD photoresist project and the 5,500t/a synthetic new material project have been stably supplied to customers, the production capacity of the 100t/a high-performance optoelectronic material purification project is steadily increasing, and the testing capacity and production line construction of OLED materials are progressing in an orderly manner. As the company's product structure becomes more and more perfect, future performance is expected to continue to grow.

Risk warning: raw material prices fluctuate greatly; production of new projects falls short of expectations; downstream demand falls short of expectations.