Event Overview: Company Releases 2023 Annual Report and 2024 Quarterly Report [2023]
Annual revenue of 1,717 billion yuan, up 24%; net profit to mother was 251 million yuan, up 25%; net profit after deducting non-return to mother was 187 million yuan, up 36%; and gross profit margin was 42.53%, up 4.13 pcts.
[23Q4]
Revenue for a single quarter was $510 million, up 5% from the same period; net profit to mother was 0.30 million yuan, down 47% and 64%; net profit from non-return to mother was 0.05 billion yuan, down 86% and 93%; gross profit margin was 42.68%, up 7.40 pcts from the same period and 1.56 pcts.
In the case of a year-on-month increase in gross margin in 23Q4, net profit decreased, mainly due to the sharing of expenses paid for new shares during the quarter. The expenses for the quarter were about 197 million yuan, an increase of nearly 50 million yuan over the 22Q4 period, and an increase of nearly 80 million yuan over the 23Q3 period.
[24Q1]
Revenue for a single quarter was 244 million yuan, down 15% and 52%; net profit to mother was 0.16 million yuan, down 76% and 47%; net profit from non-return to mother was deducted of $08 billion, down 85% and 59%; gross profit margin was 40.30%, down 5.02 pcts and 2.38 pcts.
The order pace affected 24Q1 revenue confirmation, and the continuous increase in R&D efforts was affected by the pace of customer orders. The company signed more new 23H2 orders than 23H1 new orders. At the same time, due to the stock order structure and delivery/acceptance cycle, the company's 24Q1 revenue fell nearly 15% year-on-year. The decline in revenue volume directly affected the scale of profit. In addition, there were several factors that contributed to the year-on-year decline in net profit due to the following factors: 1) The number of employees increased sharply at the end of 23, and employee remuneration expenses increased 35% year on year; 2) 1.26 million shares were granted in a new installment in August 23, increasing 24Q1 share payment fees by 266% year on year; 3) software value-added tax rebates received on 24Q1 decreased by 43% year on year; 4) R&D efforts continued to increase. The 24Q1 R&D expenses rate was 18.6%, up nearly 6.4 pcts year on year.
Frontier gluing development+ cleaning is progressing smoothly, and advanced packaging equipment is being applied to first-line large-scale factories 1) ArF immersion gluing equipment has progressed well in the client: the immersion gluing projector has been verified on the client in 22Q4, and various measured data have performed well, and has been recognized by downstream customers. By the end of '23, the company's immersion machines had received orders from 5 important domestic customers. On new products: The company has also made good progress in sales of new machines such as high-end NTD negative imaging and SOC coating. 2) Launch of strategic chemical cleaning equipment: Qiandao physical cleaning machines are in strong demand, and the products have become mainstream products for domestic logic and power device manufacturers. In 2023, the company's next-generation high-capacity physical cleaning machine was sent to important domestic storage customers for verification, which can meet the higher production capacity requirements of storage customers, and is expected to open up new incremental market space in the storage field in the future. In addition, it has also made substantial breakthroughs in the development and industrialization of chemical cleaning machines with strategic new products. It has now received verification orders from important domestic customers, and is expected to grow into a new performance growth point for the company in the future. 3) Advanced packaging equipment launched new products such as temporary bonding: Some technical indicators of the company's advanced packaging machines have reached the leading international level and have been recognized by many customers at home and abroad. Glazing and imaging equipment for advanced packaging and single-chip wet processing equipment have been used as mainstream models in batches for many years in large domestic and international first-tier factories such as TSMC, Shenghe Jingwei, Changdian Technology, Huatian Technology, Tongfu Microelectronics, and Zhuhai Tiancheng. Furthermore, for the Chiplet field, the company launched various new products such as temporary bonding, unbonding, and frame cleaning to achieve good order signing performance.
The Lingang factory was put into operation, global layout+multi-field expansion
The company currently has two factories in Shenyang+Shanghai Lingang factory. Among them, the old factory in Shenyang produces back-end, small-scale equipment; the new factory produces front-end track and physical cleaning machines. The production base at the Shanghai Lingang Plant was officially put into operation in March 2024. The project achieved the production of equipment such as anterior gluing and screening, and frontal cleaning after delivery. In addition, the company set up three subsidiaries in Japan, Guangzhou, and Shenyang: the Japanese subsidiary was established in August 2022 to develop overseas core supplier resources, introduce high-end talents, and develop new products; the Guangzhou subsidiary was established in September 2023 to develop core components such as photoresist pumps; the Shenyang subsidiary was established in January 2024, and will mainly develop new high-end packaging products such as 2.5D and 3D in the future.
Investment advice
Considering the pace of conversion of orders in 2023 into 2024 revenue and the impact of share payments, we adjusted the forecast for the company's 2024-25 net profit to be $35/50 million (originally forecast was $40/570 million for 2024-25) and added a net profit forecast for 2026 of $620 million. The current market value corresponds to 2024-26 PE of 35/25/20 times. There is strong certainty about the trend of equipment localization. As a leader in domestic glue-coated imaging equipment, the company is expected to achieve a significant increase in the share of large fab customers, thereby bringing greater order flexibility. We maintain the company's “buy” rating.
Risk warning
The downstream boom falls short of expectations, R&D verification falls short of expectations, and new product market development falls short of expectations.