Description of the event
The company released its 2023 annual report, achieving revenue of 2.94 billion yuan (+17.7% YoY), achieving net vested profit of 410 million yuan (+36.4% YoY), and realized non-net profit of 390 million yuan (+82.3% YoY). Among them, Q4 achieved revenue of 750 million yuan in a single quarter (+14.5% YoY, -9.5% YoY), realized net profit of 60 million yuan (-1.9% YoY, -55.4% YoY), and realized non-net profit of 60 million yuan (+196.3% YoY, -41.0% month-on-month). In 2023, a cash dividend of 0.59 yuan (tax included) will be distributed per share, and a total cash dividend of 350 million yuan (tax included) will be distributed.
Incident comments
The volume of main business increased sharply, helping to increase performance. In 2023, benefiting from the restoration of the automobile and tire rubber industry chain and breakthroughs in the company's electronic materials business, the company's main business saw a sharp rise in volume profit in specialty rubber additives and electronic materials.
In terms of special rubber additives, in 2023, the company achieved output of 139,000 tons and sales of 1.41 million tons, respectively; gross margin was 25.2%, +1.3 pct year on year; in terms of electronic materials, the company achieved output of 12,220 tons and sales volume of 12,489 tons in 2023, +42.5% year on year; gross margin was 26.3%, +1.7 pct year on year. Benefiting from the increase in profits of the affiliated company Zhongce Rubber, the company achieved an investment income of 220 million yuan in 2023, +35.6% over the same period last year.
2023Q4, investment income of joint ventures declined significantly month-on-month, leading to a month-on-month decline in the company's net profit. Looking forward to the future, along with macroeconomic recovery, demand for tires and their raw materials is expected to continue to pick up, and the operating efficiency of the company's rubber additives business and joint ventures are expected to continue to rise; with the gradual commissioning of the Shanghai photoresist factory, the electronic materials business is expected to continue to grow.
The photoresist business continues to grow rapidly. In terms of semiconductor photoresists, the company achieved revenue of 200 million yuan in 2023, +14.1% year-on-year. Consumer demand was weak. Under the downward trend in global wafer manufacturing, the company's semiconductor photoresist business bucked the trend. Among them, KrF photoresists grew rapidly year on year, and ICA photoresists grew at a rate of 335%. In terms of display panel photoresists, its display panel photoresists achieved revenue of 260 million yuan in 2023, or +22.8%. The domestic market share for panel photoresists was about 22.1%. Beixu Electronics is the largest domestic supplier. It has made significant progress in the AMOLED application market, and high-resolution photoresists and low-temperature photoresists have achieved mass production and sales respectively.
ArF photoresists have made a major breakthrough. In 2023, the company achieved a major breakthrough in ArF photoresists. The first batch of ArF photoresists were able to match the products of major international photoresist manufacturers. Some of these ArF photoresists passed downstream customer product certification in the first quarter of 2024, and are preparing to begin production in the second quarter of 2024. The current production capacity can simultaneously supply most domestic chip manufacturers, and can also meet the demand for advanced domestic photoresists.
The Shanghai photoresist factory has been partially completed and will be gradually completed in 2024. The company's annual output of 11,000 tons of semiconductors, photoresists for flat panel displays, and 20,000 tons of related supporting reagents has been partially completed. The products cover high-end photoresists such as semiconductor photoresists, panel adhesives, EBR and other high-end photoresists and their supporting products. Each production line will be gradually completed in 2024, helping the company continue to improve its photoresist business R&D and mass production capacity.
Maintain a “buy” rating. The company is a domestic leader in special rubber additives and photoresists, and has excellent research and development capabilities. Special rubber additives are expected to benefit from the recovery in tire demand and continued recovery, and photoresists are expected to continue to develop rapidly, helping to replace domestic production and control in the industrial chain. Net profit attributable to 2024-2026 is expected to be 5.3, 6.8, and 780 million yuan, maintaining a “buy” rating.
Risk warning
1. The macroeconomic economy fell short of expectations;
2. Product verification falls short of expectations.