Incident Overview
On April 28, 2024, UFJ Technology released its 2023 annual report and report for the first quarter of 2024: in 2023, the company achieved operating income of 587 million yuan, up 21.19% year on year; net profit to mother was 114 million yuan, up 59.27% year on year; gross margin was 40.63%, down 0.05 pct year on year, net margin was 19.45%, up 4.65 pct year on year.
Among them, the fourth quarter of 2023 achieved operating income of 161 million yuan, down 1.97% year on year and 6.34% month on month; net profit to mother was 34 million yuan, down 14.59% year on year and up 28.34% month on month; gross margin was 43.19%, down 2.34 pct year on year, up 2.45 pct month on month, net interest rate was 20.81%, down 3.07 pct year on year, up 3.57 pct month on month.
In the first quarter of 2024, the company achieved operating income of 150 million yuan, up 35.51% year on year and 6.95% month on month; net profit to mother was 34 million yuan, up 140.50% year on year, up 0.96% month on month; gross margin was 45.79%, up 8.27 pct year on year, up 2.60 pct month on month, net interest rate was 22.58%, up 9.86 pct year on year, up 1.77 pct month on month.
Introducing a restricted stock incentive program for technical personnel
On April 28, 2024, UFJ Technology released the 2024 Restricted Stock Incentive Plan (draft). The number of restricted shares to be granted under the incentive plan is 20.087 million shares, accounting for about 2.55% of the company's total share capital of 79.4055 million shares when the draft incentive plan was announced. The target audience of this incentive plan is 184 people, including the company's three core technicians and 181 key technical (business) personnel. The grant price for restricted shares (including reserved grants) is 43.05 yuan/share. The attribution conditions for the three vesting periods are: the company's operating income in 2024 is not less than 764 million yuan, or the non-net profit is not less than 80 million yuan; the company's operating income in 2025 is not less than 940 million yuan, or the deducted non-net profit is not less than 98 million yuan; the company's operating income in 2026 is not less than 1,116 million yuan, or the deducted non-net profit is not less than 117 million yuan.
There was a high increase in casting weldments, and the gross margin increased markedly. In 2023, the company's intelligent X-ray inspection equipment achieved revenue of 518 million yuan, an increase of 24.01% over the previous year, accounting for 88.68% of total revenue. The gross margin was 37.49%, a year-on-year decrease of 0.71 pct, of which:
Integrated circuit and electronics manufacturing achieved revenue of 236 million yuan, up 12.24% year on year, accounting for 40.37% of total revenue, gross margin of 45.71%, up 0.75pct year on year; lithium battery testing achieved revenue of 134 million yuan, up 2.20% year on year, accounting for 22.90% of total revenue, gross margin of 22.21%, down 8.09pct year on year; casting welding parts and materials inspection achieved revenue of 137 million yuan, accounting for 23.43% of total revenue, gross margin of 38.81% year on year increase 5.77pct Spare parts and other businesses achieved revenue of 66 million yuan, an increase of 22.25% over the previous year, accounting for 11.32% of total revenue. The gross margin was 66.45%, an increase of 7.19 pcts over the previous year.
In 2023, the cost rate was 18.26%, up 0.24pct year on year; R&D cost rate was 11.28%, up 2.06 pct year on year. The company's expenses rate for the first quarter of 2024 was 17.77%, down 2.57 pcts year on year; R&D expenses rate was 13.63%, up 2.74 pcts year on year.
Products are continuously upgraded, and new ray source products are launched
1. Electronics manufacturing & integrated circuits: In the field of integrated circuits, the company has gradually broken the foreign monopoly position in this field and has delivered to customers such as Hongwei Technology, Star Semiconductor, BYD Semiconductor, Tongfu Microelectronics, and Changdian Technology. In the field of electronics manufacturing, the company has developed micron-level 2D offline and online inspection equipment and 3D/CT inspection equipment, which can effectively detect internal defects in PCB and PCBA processes in electronics manufacturing, and has accumulated more than 2,000 customers.
2. Lithium battery: A rapid CT inspection system for lithium batteries has been successfully developed, which can quickly complete micron-level 3D/CT full scanning of lithium batteries within 3 seconds. The company's new energy battery testing equipment has covered well-known new energy battery customers such as Sunwoda, BYD Lithium Battery, and Ningde Times.
3. Casting weldments: In the field of high-power X-ray intelligent inspection equipment, covering various types of casting weldments and materials in various industries such as automobile manufacturing, aviation, etc., it has successfully developed and delivered the first integrated die-cast frame X-ray AI intelligent inspection equipment. Currently, this product has covered many well-known automobile manufacturers at home and abroad, including Changan Automobile, Daqing Volvo, Chongqing Xiaokang Power, etc.
4. Radiation source: Through independent research and development, the company has realized the industrial application of 90kV, 110kV, 120kV, 130kV, and 150kV series microfocus X-ray sources, successfully breaking the absolute monopoly position of overseas manufacturers. The company is accelerating the research and development of 160 kV open tube ray sources and high-power low-focus radiation sources. It has now broken through the core technology of related products and is in the prototype testing and verification stage.
Investment advice
Affected by the macro environment and the pace of radiation source volume, we lowered the company's profit forecast and predicted that the company's revenue for 2024-2026 would be $887/11.44/$1,418 billion ($1,244/2.045 billion for 24-25 years before adjustment), and net profit to mother of $1.72/2.29/$285 million ($311/688 million for 24-25 years before adjustment), and diluted EPS calculated at 2.16/2.88/3.59 yuan based on the current total share capital of 79 million shares. The company's current stock price is 30/23/18 times the PE multiples of the predicted EPS for 2023-2025, respectively. Considering that the company is a leading enterprise in industrial X-ray inspection equipment and has strong domestic replacement capabilities, it maintains a “buy” rating.
Risk warning
1) Key technology and brain drain risk. 2) The risk that the import substitution and market expansion of the company's micro-focus X-ray sources and related testing equipment may fall short of expectations. 3) Risks associated with the release of production capacity falling short of expectations. 4) The risk of error in estimating market space. 5) The risk that the information on which the research is based is not updated in a timely manner and does not fully reflect the company's latest situation.