Incidents:
The company released its 2024 quarterly report and 2023 annual report. In the first quarter of 2024, the company achieved revenue of 272 million yuan, up 48.54% year on year; net profit of 50 million yuan, up 155.22% year on year; net profit after deducted from mother of 45 million yuan, up 194.24% year on year; achieved revenue of 924 million yuan, up 21.26% year on year; net profit from mother of 134 million yuan, up 35.18% year on year; net profit after deducting net profit of 113 million yuan, up 42.48% year on year.
Profitability has increased significantly, and the Foshan project has established confidence in medium- to long-term development:
The company's profitability continues to improve. The profit growth rate is higher than the revenue growth rate, and gross margin is growing quarterly.
The gross margin for the Q1 quarter of 2023-2024 increased quarterly. The gross margin for the first quarter of '24 increased 7.06 pcts year on year and 3.06 pcts month on month. Gross margin increased by 2.42 pcts year-on-year in 2023, mainly due to increased capacity utilization and product structure optimization. The cost ratio has been declining steadily. In 2023, sales and management expenses increased year on year, and R&D expenses declined slightly year on year. At the same time, the company's main raw materials are settled in yen, and the upstream supply chain continues to reduce costs due to the sharp depreciation of the yen and its stability at a relatively low level. The company announced in December 23 that it will invest RMB 3.5 billion in total for the construction of a production base in Foshan. The three phases will invest a total of RMB 3.5 billion, respectively, for the high-end semiconductor mask project covering 250nm-65nm and 2 billion yuan for the high-precision flat panel display mask project. Its “two-wing” strategy provides the company's medium- to long-term development impetus, which is expected to continue to increase the company's penetration rate and accelerate the domestic production substitution process.
The tablet display mask version focuses on the middle and high-end, and Hefei Qingyi production capacity is gradually being released:
In 2023, the flat panel display business revenue was 731 million yuan, accounting for 79.06% of total revenue. The year-on-year increase was 25.42%, mainly due to increased new product development efforts by downstream manufacturers, and the demand side of the tablet display mask version grew. Among them, AMOLED/LTPS's 2023 revenue was 297 million yuan, up 43.91% year over year. The subsidiary Hefei Qingyi's flat panel display industry continues to rise in the production and sales scale of mask versions, and orders for high-specification products have increased. Revenue increased 30.30% year over year. The products mainly include high-end products such as AMOLED/LTPS. The newly introduced flat panel display mask plate lithography equipment entered the factory at the end of the third quarter of 2023. It is expected that comprehensive production capacity and technical capabilities will be further enhanced after production starts in January 2024. As Hefei's overflowing production capacity was gradually released. The company has now achieved mass production of 8.6-generation high-precision TFT mask versions and 6-generation medium- to high-precision AMOLED/LTPS mask versions, and has achieved mass production of mask substrate gluing processes and the supply of semi-permeable membrane mask (HTM) products to many customers. It plans to develop 6th generation ultra-high precision AMOLED/LTPS and other mask versions and develop high-specification semi-permeable membrane mask versions (HTM).
The production capacity of semiconductor mask versions has increased, and mature process and more advanced node products have been steadily promoted:
In 2023, semiconductor mask revenue was 144 million yuan, accounting for 15.61% of total revenue. The year-on-year increase was 41.04%, mainly due to increased domestic demand for semiconductor mask versions. At present, mass production of 180nm process node semiconductor chip mask versions, as well as 150nm customer testing, certification, and small-scale mass production, is being promoted. Mask plate development for 130nm-65nm PSM and OPC processes and mask plate process development plans required for 28nm semiconductor chips are being promoted. According to the annual report, since April 23, the semiconductor chip mask business was gradually transferred to the second-tier subsidiary Shenzhen Qingyi Micro Operation, and 23 new cleaning equipment, AOI and lithography machines were put into operation. The new products were gradually increased in the second half of '23. The current product layout includes IC Bumping (IC Bumping), IC Foundry (IC Foundry), IC Substrate (IC Substrate), MiniLED chips, MicroLED chips, MEMS, Micro OLED, etc.
Investment advice:
We expect the company's revenue for 2024-2026 to be 1,179 million yuan, 1,514 billion yuan and 1,968 billion yuan respectively, and net profit to mother will be 178 million yuan, 229 million yuan, and 271 million yuan respectively, corresponding to EPS of 0.67 yuan, 0.86 yuan, and 1.01 yuan respectively. Taking into account the urgent need for localization in the mask plate industry, the company's leading position in the tablet display mask market, and future new production capacity construction, the company was given 35 times PE in 2024, corresponding to a target price of 23.45 yuan for 6 months, maintaining a “buy-A” investment rating.
Risk warning: policy changes and trade situation uncertainty; risk of relying on imports of equipment and materials; risk of asset-heavy operations; progress of new products falling short of expectations; capacity expansion falling short of expectations, etc.