Description of the event
Recently, the company released its 2023 annual report and 2024 quarterly report. In 2023, the company achieved revenue of 1,572 billion yuan, +20.83% year on year; realized net profit of 256 million yuan, +54.11% year over year; deducted non-net profit of 255 million yuan, +73.18% year on year. With 2024Q1, the company achieved operating income of 363 million yuan, +17.87% year over year; realized net profit of 53.31 million yuan, +69.19% year over year; deducted non-net profit of 52.74 million yuan, an increase of 70.39% year on year.
Incident reviews
The recovery in consumer electronics demand boosted revenue, while falling costs improved gross profit margins. In 2023, the company's revenue and net profit to mother achieved positive growth, mainly due to a recovery in the electronics industry's prosperity and a steady recovery in downstream demand such as consumer electronics. 2024Q1 has largely continued the recovery trend of 2023. Gross profit margin in 2023 was 35.82%, up 6.37 percentage points year over year; 2024Q1 gross margin increased further to 39.22%. The increase in gross margin was mainly due to a reduction in the cost of some raw materials and an increase in utilization due to a recovery in orders.
Paper carrier tape continues to optimize the product structure, and plastic carrier customer development has achieved breakthrough progress. In 2023, the company achieved revenue of 1,153 billion yuan for electronic packaging thin carriers, +22.84% over the same period, accounting for 73.34% of the company's revenue; gross margin increased sharply from 33.00% in 2022 to 40.52% in 2023.
The company continues to optimize the paper carrier tape product structure and increase the production and sales of high value-added products such as perforated paper tape and perforated paper tape. In the field of plastic carrier belts, the company has strengthened customer development and achieved breakthrough progress in the semiconductor packaging and testing field, and the business development momentum is good; it has added production equipment and roller production lines for precision small-size products. Currently, the company has more than 80 production lines for various plastic carrier belts, and production capacity has been further increased.
Customers in Japan and South Korea are expected to gradually release the release film, and the Zhaoqing production line will enter trial production. In 2023, the company's electronic grade film materials achieved revenue of 130 million yuan, +48.38% year-on-year. Among them, the MLCC release film is in the small-batch trial stage at Murata, a Japanese customer, and is expected to gradually increase; the Korean customer Samsung has basically completed the main testing process and has already obtained small-batch orders, and it is expected that it will gradually be launched in the future. In terms of production capacity, the first release film production line at the Zhaoqing production base in Guangdong entered trial production at the end of 2023, and the second line is being installed. The release film business is expected to grow rapidly in the future as production capacity is already rising from major customers in South Korea and Japan.
Investment advice
Jiemei Technology is the world's leading supplier of electronic packaging belts. With the recovery in downstream demand combined with product structure optimization, the company's traditional carrier business is expected to continue to grow steadily. Release films have already been ordered in small quantities from major customers in Japan and South Korea, and it is expected that they will gradually begin to be launched in the future. We expect that the company's net profit for 2024-2026 will be 3.51/524/749 million yuan; EPS will be 0.81/1.21/1.73 yuan respectively; the corresponding company's closing price on April 30, 2024 will be 20.53 yuan, and the 2024-2026 PE will be 25.3/17.0/11.9, respectively, covered for the first time, giving it a “buy-A” rating.
Risk warning
Risk of changes in industry demand. Uncertainty in the external macroeconomic environment has increased dramatically in recent years, and international trade disputes are still ongoing and the trend is unclear. It is not ruled out that in the future, when the global economy fluctuates, consumers cancel or postpone the purchase of electronic products, leading to a decline in production and sales of related electronic products, and the subsequent contraction of market demand for functional devices poses business risks to the company.
Risk of fluctuations in raw material prices. The company's direct material costs account for about 70%, of which wood pulp accounts for about 45% of the production cost of paper carrier tape, and is the company's most important raw material. In addition to wood pulp, PET film, uncoated tissue, polyethylene, PC particles, polyester chips, etc. are also the company's main raw materials. Most of the company's main raw materials are commodities, and prices fluctuate greatly due to various macroeconomic factors such as exchange rates and international crude oil prices, making it difficult to manage the company's production costs. In addition, the world is affected by factors such as local wars, and uncertainty about the supply of imported raw materials from abroad has intensified. If the prices of the company's main raw materials continue to fluctuate greatly, some of the rising costs may not be transmitted downstream, which in turn affects the company's gross margin level.
Risk of exchange rate fluctuations. The company's export revenue accounts for a large proportion of operating income, and there are situations where payments are made in US dollars. Fluctuations in the US dollar exchange rate will affect the company's product prices and operating income to a certain extent.
In terms of procurement, the amount of wood pulp imported by the company accounts for a large proportion of the company's total purchases. This type of procurement is settled in US dollars, and fluctuations in the US dollar exchange rate will have a certain impact on the company's costs. Furthermore, exchange rate fluctuations will have a certain impact on the company's exchange gains and losses. Although the company uses measures such as adjusting product prices and using hedging tools to prevent the risk of exchange rate fluctuations, if the foreign exchange rate fluctuates greatly in the future, it may still affect the company's gross margin level and exchange profit and loss, and adversely affect the company's operating performance.