Gross margin declined sequentially in 1Q24 due to industry sentiment. In '23, the company achieved revenue of 9.9 billion yuan (YoY -1.59%), net profit after deducting non-attributable net profit of 1,227 billion yuan (YoY -49.97%), and gross profit margin of 32.22% (YoY 4.49pct). Among them, the increase in manufacturing costs and depreciation combined with product price adjustments, and gross margin declined. Entering 1Q24, the company's profit margin declined further due to industry price adjustments compounded by 12 inches and early investment in sealing and testing bases. The company achieved revenue of 2,116 billion yuan (YoY -9.8%, QoQ -10.7%), net profit net profit of 58 million yuan (YoY -82.8%, QoQ -72.1%), and gross profit margin of 26.48% (YOY-8.33pct, QoQ-1.95pct) in a single quarter.
The revenue of products and solutions was 46.7 yuan (YoY -5.62%) in 23 years, and gross margin decreased year on year. Affected by product prices in '23, the gross profit margin of the product and solution business was 26.62% (Yoy-9.51pct), and the product structure was gradually optimized: medium and pan-renewable energy accounted for 39%, consumer electronics accounted for 34%, industrial equipment accounted for 16%, communication equipment accounted for 11%, consumer products declined, and products expanded into fields with high product value. In addition, the company's new products are expanding at an accelerated pace:
High voltage superjunction MOS revenue increased 46% year over year; IGBT revenue was about 700 million yuan, and various main drive modules were launched; SiC MOS already accounts for more than 60% of silicon carbide revenue, and automotive-grade SiC MOS has entered the curing batch streaming stage; power IC revenue increased 100.5% year over year, and IPM revenue increased 139.7% year over year.
The manufacturing and service sector's revenue increased 2.66% in 23 years, and the process platform continued to be upgraded. In '23, the company's OEM business had strong customer stickiness and high business stability. The manufacturing and service business segment achieved revenue of 5,080 billion yuan (YoY +2.66%) and a gross profit margin of 37.42% (YOY-0.19pct). On this basis, the process platform was gradually upgraded: the 0.11 micron BCD technology platform completed process platform curing, 0.18 micron HR BCD entered small-batch production, and the 0.5 micron ultra-high pressure SOI BCD technology platform passed the pilot customer application certification.
The company invested 11.67% in R&D in '23, and the sealing, testing and masking business progressed smoothly. In '23, the company invested 1,154 billion yuan (YoY +25.3%) in R&D, focusing on products such as gallium nitride devices, DrMOS, and SiC MOS.
Advanced packaging and measurement power base mass-produced, panel-level packaging production capacity expanded, revenue increased 60% year on year, mass production of new IPM packaging products, and large-scale mass production of LFPAK, TOLL, and TO247; mask business revenue increased 30.6% year on year, net profit increased 20.7% year on year, and high-end mask project equipment entered the market one after another.
Investment advice: Considering the impact of industry price cuts on gross margin and the optimization of the company's cost side, the company's net profit for 24-25 was lowered based on the company's operating conditions in the first quarter of '23 and '24. It is estimated that in 24-26, the company is expected to achieve 11.8/13.5/15.1 (previous value: 22.8/2.68 billion yuan), corresponding to the 24-26 PE of 43/38/34 times, respectively, to maintain a “gain” rating.
Risk warning: Demand for new energy falls short of expectations, production line construction falls short of expectations, etc.