Xingsen Technology announced its 2023 performance forecast: The company's overall profitability declined in 2023. The company expects to achieve net profit attributable to shareholders of listed companies of 210,000 yuan to 240 million yuan in 2023, a year-on-year decrease of 53.34% to 60.05%; net profit after deducting non-recurring profit and loss is 40 million yuan to 58 million yuan, a year-on-year decrease of 85.34% to 89.98%.
Key points of investment
Continued investment in production expansion, talent introduction, and R&D investment are the main reasons for the decline in performance
The company continues to promote investment and expansion in the packaging board business, and increase talent introduction and R&D investment. The cost burden is heavy, causing a major drag on net profit. Among them, (1) the CSP packaging substrate project of Guangzhou Xingke Semiconductor Co., Ltd., the holding subsidiary of the company, is still in the process of climbing capacity, and the capacity utilization rate is low; since the second half of the year, the capacity utilization rate of the CSP packaging substrate project has rebounded month by month, with a loss of about 67 million yuan for the full year of 2023. (2) The FCBGA packaging substrate business of Guangzhou Xingsen Semiconductor Co., Ltd., the holding subsidiary of the company, continued to promote investment and expansion of production. It was still in the customer certification, prototyping and trial production stage during the reporting period. The investment in R&D, testing and certification costs were high. The total investment in labor, materials, energy, depreciation, etc. was about 370 million yuan, which greatly dragged down current profits.
The traditional PCB business faces the double pressure of weak demand and increased competition, and will continue to step up digital transformation in the future
The company's model and small-batch board business customer concentration is low. Most of the company's customers are leading enterprises or leading enterprises in multiple downstream industries. The customers cover a wide range of industries, do not rely on a single industry or single customer, and are less affected by major downstream customers or single industry cycles or economic cycles. The proportion of downstream applications of business products is as follows: communication accounts for about 1/3, servers and security each account for 15% to 20%, industrial control and medical care each account for about 10%, and other industries account for about 15%. Yixing batch boards are mainly 8-layer high, multi-layer circuit boards. They are mainly used in the fields of 5G, optical modules, servers, security, etc. They have achieved mass production breakthroughs for large clients in the communications and server fields, but due to weak downstream demand and increased competition, the gross margin level has declined.
The digital transformation in the traditional PCB field is progressing steadily. Through digital transformation, quality improvement, cost reduction and efficiency have been achieved, competitiveness has been enhanced in terms of quality, technology, and delivery, and steady growth has been achieved.
The packaging substrate project is progressing smoothly, and we will adhere to the high-end packaging substrate strategy in the future
The company's current production capacity for CSP packaging substrates is 35,000 square meters/month, of which the Guangzhou base has a production capacity of 20,000 square meters/month and is fully produced; Guangzhou Xingke's Zhuhai base has a production capacity of 15,000 square meters/month, and the capacity utilization rate is over 50%. The memory chip industry is the company's largest downstream market in the field of CSP packaging substrates, accounting for about 2/3 of revenue, and other related fields such as fingerprint recognition chips, RF chips, application processor chips, and sensor chips accounting for about 1/3. Beginning in the fourth quarter of 2022, orders for CSP packaging substrates were insufficient, and orders began to pick up in May 2023. The operating efficiency of future CSP package substrates projects mainly depends on the recovery in overall demand.
The technical ratings, system certification, and reliability verification of some major customers of the company's Zhuhai FCBGA packaging substrate project have all passed. It is expected to enter the small-batch production stage in the first quarter of 2024. Currently, there is a small amount of sample order revenue, and the amount is relatively small. The equipment installation and commissioning of the Guangzhou FCBGA packaging substrate project has basically been completed and has entered the internal process testing stage.
CSP packaging substrates will begin production expansion plans after current production capacity is reached; FCBGA packaging board projects continue to be added, and customer certification, yield improvement, and production line construction are progressing steadily.
Profit forecasting
The company's revenue for 2023-2025 is 57.69, 74.25, and 9.031 billion yuan respectively, and EPS is 0.14, 0.28, and 0.36 yuan respectively. The current stock price is 76.4, 36.5, and 28.5 times PE, respectively. The company lays out packaging substrates, adheres to the high-end route, and continues to rise in production capacity. As downstream orders pick up, it is expected to achieve second growth, first coverage, and a “gain” investment rating.
Risk warning
The risk of increased competition in the industry; the risk of developing new products and technologies; the risk of management due to the expansion of the company's size; the risk that product launch volume falls short of expectations; the risk that downstream demand falls short of expectations.