Key points of investment
On May 8, 2024, the company issued a prospectus (registration draft) for issuing convertible corporate bonds to unspecified targets.
Previously, the company released its first quarter 2024 report and its 2023 annual report.
The release of production capacity was compounded by the restoration of market sentiment, and the company's performance grew steadily. With the gradual implementation and completion of the company's initial fund-raising project, the 12-inch high-end sealed production capacity continued to increase, compounded the gradual restoration of downstream market sentiment. The company's business situation improved markedly since 23Q2. In 2023, the company achieved revenue of 1,238 billion yuan, an increase of 31.78%; net profit of 196 million yuan, an increase of 10.59%; net profit after deduction of 168 million yuan, an increase of 33.30%; gross profit margin of 26.45%, a decrease of 2.27 percentage points, mainly due to a significant increase in depreciation; and R&D investment of 79 million yuan, an increase of 21.06% year on year.
Affected by the boom cycle of the downstream panel industry, compounded by factors such as the Spring Festival holiday, the first quarter was a traditional low season in the industry. Order saturation declined somewhat, and the 24Q1 operating rate declined slightly from month to month. 24Q1 achieved revenue of 315 million yuan, a year-on-year increase of 30.63% and a decrease of 8.07%; net profit to mother of 0.26 million yuan, an increase of 0.10% year-on-year and a decrease of 51.16% month-on-month; net profit after deducting non-return to mother of 0.2 million yuan, an increase of 30.02% year-on-year and a decrease of 56.25% month-on-month; and gross profit margin of 19.19%.
Continuously increase the production capacity of high-end test platforms and further optimize the product structure. The company plans to issue convertible corporate bonds to unspecified targets, raising no more than 1,149 million yuan. Among them, the 12-inch advanced process new display driver chip wafer gold bump manufacturing and wafer testing and expansion project and the 12-inch advanced process new display driver chip wafer testing and chip packaging expansion project plan will invest 350 million yuan and 500 million yuan respectively, with the aim of increasing the packaging and testing scale of the company's new display driver chips such as OLED, and expanding the automotive display panel market.
The company has invested in the project in advance with its own capital. By the end of 2023, the engineering progress of both projects had reached 25%.
According to the company's January 2024 investor survey minutes, the company stated that the additional production capacity is expected to be gradually released in 24H1; at the same time, due to strong downstream demand and the continuous increase in OLED screen penetration, the company expects the OLED product sealing and testing business revenue share to continue to grow in 2024.
12-inch advanced process new display driver chip wafer gold bump manufacturing and wafer testing capacity expansion project: The company expects to add production capacity of 240,000 pieces/year for wafer gold bumps and 54,000 wafer testing after delivery, which can achieve annual revenue of 303 million yuan and annual profit of 60 million yuan.
12-inch advanced process new display driver chip wafer testing and chip packaging capacity expansion project: The company expects to add 68,400 wafer testing wafers per year, 204 million COG units/year, and COF 96 million units/year after delivery, which can achieve annual revenue of 149 million yuan and annual profit of 40 million yuan.
Investment advice: In view of the company's continuous expansion of production capacity and the large scale of depreciation, we adjusted our original profit forecast for 24/25. It is estimated that from 2024 to 2026, the company's revenue will be 1,440/17.80/2.047 billion yuan respectively, with growth rates of 16.3%/23.6%/15.0%, respectively; net profit due to mother will be 2.31/2.88/ 334 million yuan (the original forecast value for 24/25 was 265/342 million yuan), with growth rates of 18.0%/24.5%/16.0%, respectively; PE 29.5/23.7/20.4, respectively. The company has formed a comprehensive service capability for packaging and testing the entire process of display driver chips, continuously improving the production capacity of high-end test platforms, seizing OLED market opportunities, and has sufficient growth momentum. Continued recommendation, maintaining a “buy-A” rating.
Risk warning: Downstream terminal market demand falls short of expectations; risk that new technologies, new processes, and new products cannot be industrialized as scheduled; market competition exacerbates risks; risks that capacity expansion progress falls short of expectations; systemic risks, etc.