Description of the event

The company released its 2023 annual report, achieving full year revenue of 517 million yuan, an increase of 12.73%; realized net profit to mother of 122 million yuan, an increase of 8.16%; and realized net profit without deduction of 76 million yuan, a decrease of 5.31%.

The company released its 2024 quarterly report, achieving revenue of 258 million yuan, an increase of 6.99%; realized net profit of 95 million yuan, an increase of 0.22%; and realized net profit without deduction of 74 million yuan, a decrease of 16.91%.

Incident reviews

The materials business continues to improve. By business, organic light-emitting materials achieved revenue of 318 million yuan in 2023, an increase of 49.42% over the previous year, and evaporation source equipment achieved revenue of 199 million yuan, a year-on-year decrease of 19.01%. Meanwhile, with 2024Q1, the company achieved material business revenue of 129 million yuan, an increase of 95.64% over the same period, an increase of 34.48% over 23Q4, and the materials business continued to improve.

The gross profit margin and expense ratio have both increased. The company's gross margin also increased by 1.86 pct to 56.46% in 2023. Among them, the gross margin of organic light-emitting materials also increased by 13.35 pcts to 50.37%. Mainly due to the rapid release of new materials with high gross margins, the gross margin of evaporation source equipment decreased by 3.55 pct to 66.20%. In terms of cost ratio, the company's expense ratio also increased by 5.59 pct to 39.26% during 2023, of which the sales expense ratio also increased 0.28 pct to 3.10%; the management expense ratio increased 2.56 pct to 18.36%; the financial cost ratio also increased 2.62 pct to -1.88%; and the R&D expense ratio also increased 0.13 pct to 19.67%.

The materials business focuses on R&D, and PSPI/packaging materials are expected to be released. In terms of organic light-emitting materials, the company's product structure ranges from simple intermediates and front-end materials to terminal materials with high technical barriers. At the same time, it also uses various core technologies such as product structure design, production process optimization and quality control to improve product performance and enhance product competitive advantage. The existing technology is mature and has been widely used in product mass production. At the same time, based on its deep R&D foundation and transformation capabilities, the company has broken the technological monopoly of foreign companies in packaging materials and PSPI materials, and promoted the transformation and implementation of the company's R&D results. At present, packaging materials and PSPI materials independently developed by the company have been supplied to the production line, which will further open up market space for localization alternatives.

Evaporation source equipment has been replaced by imports, and medium size is expected to bring a new round of equipment release opportunities. In terms of evaporation source equipment, the sixth-generation AMOLED linear evaporation source produced by the company successfully broke foreign monopolies and achieved import substitution. Looking at the generational development of the production line, the current OLED panel production line is mainly based on the 6th generation AMOLED production line. With the application demand for high-performance OLED displays in medium size fields such as laptops and lighting, South Korea's Samsung and China BOE have begun construction of high-generation AMOLED production lines. In the future, it will form a production line pattern dominated by the 6th generation line and the 8.5 generation line, which is expected to bring a new round of equipment deployment opportunities.

Profit forecasting and valuation

The company's revenue for 2024-2026 is expected to be 7.14, 10.11, and 1.270 billion yuan, with year-on-year growth rates of 38.02%, 41.60%, and 25.58%; net profit to mother is 1.79, 2.62, and 331 million yuan, with year-on-year growth rates of 46.40%, 46.18%, and 26.55%. The company's 2024-2026 performance corresponding PE was 29.26, 20.02, and 15.82 times, respectively, maintaining a “buy” rating.

Risk warning:

The risk of technology upgrades and iterations and technology research and development not being able to effectively meet market demand; the pace of material development and deployment falls short of expectations; the risk of fluctuations in the OLED industry and increased market competition