Incident: The company released the 2023 annual report and financial statements for the first quarter of 2024. The company's revenue for 2023 was 11.298 billion yuan, -5.1% year over year; net profit to mother was 226 million yuan, -69.98% year over year; deducted non-net profit - 308 million yuan, -216.69% year over year. The company's Q1 revenue in 2024 was 3.106 billion yuan, +38.72% year over month, -3.83% month on month; net profit to mother was 57 million yuan, +153.62% year on year, -60.24% month on month; after deducting non-net profit - 77 million yuan, the year-on-year loss was reduced by 57.72%, and the month-on-month loss increased by 291.73%.
24Q1 revenue grew rapidly year-on-year, and there were signs of a recovery in profitability: in 2023, the integrated circuit industry generally showed a trend of falling back to the bottom in the first quarter and gradually recovering in the second quarter. The company continued to pay attention to the development of the integrated circuit industry and market demand, and actively responded to the unfavorable market environment caused by the decline in packaging prices due to increased competition. The company's sales revenue improved quarter by quarter. In 2023, the company's gross margin was 8.91%, -7.93pcts year on year; net margin was 2.46%, -6.13pcts year on year. The main reason for the change in gross margin is the decline in product packaging prices due to increased competition in the industry. In terms of expenses, the company's sales, management, R&D and financial expenses rates in 2023 were 0.97%/5.38%/6.14%/0.85%, respectively. The year-on-year changes were +0.04/+0.6/+0.19/+0.06pct, respectively. The level of cost control was relatively stable. In Q1 '24, thanks to year-on-year growth in orders and product sales in the first quarter, the company's revenue grew rapidly. The company's gross margin in Q1 in '24 was 8.52%, +4.53pcts year on year, -1.36pcts month on month; net margin was 1.85%, +7.51pcts year on year, -3.77pcts month on month.
Accelerate the implementation of construction projects and increase the scale of the advanced packaging industry: the company continuously improves customer development and management models, enhances services for existing key customers in all aspects, and increases market share; for new target customers, collaborative development accelerates the process of product introduction and mass production. At the same time, the company continues to develop a regular communication mechanism with terminal customers to identify the demands of end customers and the market for packaging testing, enhance the recognition of the company's brand by end customers and the market, and strive to obtain orders. By the end of 2023, the company had introduced 302 customers.
Furthermore, according to the development of the integrated circuit market and customer needs, the company implemented fund-raising investment projects and the construction of new production bases such as Huatian Jiangsu. In terms of fund-raising investment projects, by the end of '23, the company had used the raised capital of 4.908 billion yuan, and plans to complete the construction of the fund-raising investment project in 2024.
Among them, the company UniseMgopeng is undergoing plant construction; as of May 11, '24, the company's newly built bases Huatian Technology (Jiangsu) Co., Ltd. and Shanghai Huatian Integrated Circuit Co., Ltd. have entered the trial production stage, increasing the scale of the company's advanced packaging industry.
The advanced packaging landscape continues to expand, and new products are mass-produced: In China's integrated circuit industry chain, the packaging testing industry has become the most internationally competitive link in China's integrated circuit industry chain, and is expected to take the lead in achieving comprehensive domestic replacement. As domestic packaging testing companies improve their layout in advanced packaging fields such as BGA, FC, WLCSP, Bumping, TSV, SiP, and FO, continue to release advanced packaging production capacity, and continue to integrate mergers and acquisitions, domestic companies are capable of undertaking global integrated circuit packaging business transfers, and the market size and market concentration are expected to further increase. To this end, the company continues to develop advanced packaging technology and process research and promote FOPLP packaging process development and 2.5D process verification. By the end of 2023, the company had passed the automotive-grade AECQ100 Grade0 packaging process verification, had 3D NAND Flash 32-layer ultra-thin chip stacking and packaging capabilities, completed the development of high heat dissipation indium sheet FCBGA packaging technology, ultra-thin silicon thru-hole TCB bonding technology, and HBPOP packaging technology, and achieved mass production of high-density RF SiP modules and FC+WB hybrid packaging for 5G flagship phones.
Lowering profit forecasts and maintaining the “gain” rating: The company vigorously develops advanced packaging technologies and products such as SiP, FC, TSV, Fan-Out, WLP, 2.5D, 3D, Chiplet, FOPLP, etc., and expands the company's business areas, which is expected to increase the company's market share and profitability. In the future, as downstream demand recovers and the integrated circuit market gradually picks up, the company's performance is expected to resume steady growth. Considering that sales in the global semiconductor industry are still weak, the profit forecast was lowered. The company's net profit for 2024-2026 is estimated to be 6.84/10.88/1,549 million yuan, the corresponding EPS is 0.21/0.34/0.48 yuan, and the corresponding PE is 38/24/17 times.
Risk warning: Risk of rising raw material costs, risk of failure in technology development and new product development, risk of downstream demand falling short of expectations, and production capacity expansion falling short of expected risk.