2023 and 1Q24 results fell short of our expectations
The company announced 2023 results: revenue of 1.04 billion yuan, -12.1% year on year, net profit of 60 million yuan, -70.5% year on year; at the same time, the company announced 1Q24 results, achieving revenue of 263 million yuan, -26.6% year on year, and net profit to mother of 29 million yuan, a year-on-year decrease of 50.4%. The company's LED downstream was affected by domestic macro-demand, and the performance was lower than our expectations.
The core business, crystal-fixing machines, have declined a lot, dragging down the company's profitability. By product, in 2023, the company achieved sales of 3,871 units, a year-on-year decrease of 18.73%, achieving revenue of 733 million yuan, a year-on-year decline of 19%, a gross profit margin of 31.91%, and a year-on-year decrease of 13.14ppt. The company's LED crystallizer is highly correlated with domestic macro demand, and the decline in revenue dragged down the company's annual performance. The company's sales/management/R&D/finance expense rates in 2023 were 9.2%/5.0%/9.3%/2.3%, respectively, an increase of 1.3/1.7/1.7/1ppt over the previous year. The increase in management expenses was mainly due to depreciation of the newly built assets of Xinyichang Intelligent Equipment and the increase in production and operation expenses of the subsidiary Xinghaiwei; the increase in financial expenses was mainly due to an increase in loan interest expenses due to an increase in long-term loans.
Development trends
MiniLED has sufficient on-hand orders, and the prospects for semiconductor packaging equipment are promising. By the end of 2023, the company's existing contract order amount for MiniLED crystal soldering machines was over 400 million yuan, and we expect it to be an important driving factor supporting this year's performance growth. In the field of semiconductor equipment, the company focuses on product lines such as semiconductor soldering machines and semiconductor wire welding machines, and is deeply involved in semiconductor customers such as Huawei, Changdian, Huatian Technology, Tongfuwei, and Yangjie Technology. It is expected to achieve import substitution, and the prospects are broad. In 2023, the company spent 96.53 million yuan on R&D, accounting for 9.28% of revenue.
Profit forecasting and valuation
Due to the close correlation between the company's traditional crystallizer business and macroeconomics, the downstream demand environment is currently poor. We lowered our 2024 net profit by 41.9% to 187 million yuan, and introduced a new net profit of 230 million yuan for 2025.
The current stock price corresponds to 35.9 times the 2024 price-earnings ratio and 29.2 times the 2025 price-earnings ratio. Due to the reduction in the 2024 profit forecast, we simultaneously lowered our target price by 41% to 73.2 yuan, which corresponds to 40 times the price-earnings ratio of 2024 and 32.5 times the price-earnings ratio of 2025. There is 11.4% upside compared to the current stock price. Considering the company's broad prospects in the field of semiconductor packaging equipment, it maintained an outperforming industry rating.
risks
The recovery in demand for LED crystallizers fell short of expectations; the expansion of semiconductor packaging equipment fell short of expectations.