Announcement: Fuchuang's 24Q1 revenue was 701 million yuan, up 105.47% year on year; gross profit margin was 25.39%, up 4.07pcts month on month; net profit to mother was 64.0296 million yuan, up 53.42% year on year; net profit after deducting non-return to mother was 54.0273 million yuan, up 1385% year on year. Driven by downstream customer demand, revenue grew rapidly, and the scale effect was gradually reflected, driving profit growth. At the same time, non-recurring profit and loss decreased compared to the same period last year. 24Q1 revenue exceeded expectations and profit was in line with expectations.
The proportion of high-value complex module products has further increased. Revenue in 2023 was 2,066 billion yuan, up 33.75% year on year; process components/structural components/module products/gas pipeline revenue was 4.57/4.91/9.25/ 165 million yuan, respectively, +12%/-2%/+126%/-22% year-on-year. The scale of module products grew rapidly, and the total revenue share of module products and gas pipelines increased from 40.62% in 2022 to 53.50% in 2023. Module manufacturing technology has been further improved, and an automated production line for hardware gas cabinets has been successfully developed and put into use, improving manufacturing efficiency while ensuring consistent product quality.
Local demand is booming, and overseas layout continues to advance. In 2023, domestic/overseas revenue was 1,436/602 million yuan respectively, +72%/-13% YoY. Benefiting from increased demand in the domestic semiconductor market and driven by demand for localization of components, the share of local revenue increased from 54.0% in 2022 to 69.5% in 2023. In order to cope with the decline in revenue from overseas markets, the company will respond positively by arranging overseas factories, etc.
Continued investment in research and development. In 2023, R&D expenditure was 206 million yuan, 9.97% of R&D investment, +2.08pcts year on year; 24Q1 R&D investment was 47 million yuan, up 25.01% year on year. The technical competitiveness of the company's products is constantly increasing.
Promoting production capacity at home and abroad: According to the company's prospectus and annual report, the Shenyang plant is fully produced; the Nantong plant has a planned output value of 2 billion yuan, to be put into operation in 2025; the Beijing plant has a planned output value of 2 billion yuan and is expected to reach production in 2027; a new Guangzhou subsidiary was established in December 2023; overseas, Singapore and US subsidiaries were set up in 2023, and the Singapore plant is expected to be put into operation in 2024.
Profit margins are expected to reach an inflection point, and the equity incentive plan shows a high level of confidence. In recent years, Fuchuang has been in a pre-investment period of operating capital and fixed capital, reserving resources such as production capacity, talent, and equipment in advance, leading to corresponding increases in labor costs and depreciation expenses, leading to an increase in management costs. As demand for parts localization continues to rise and overseas spending boom picks up, production capacity is gradually released, and profit margins are expected to usher in an inflection point in growth. According to the 2024 Equity Incentive Plan (draft), the trigger value of net profit deducted from non-return to mother for 2024-2025 is $250/400 million, and the target value is $400/550 million yuan.
A profit forecast was added to maintain the “Overweight” rating. Maintain the 2024-2025 net profit forecast of 31/49 million yuan, and add the 2026 net profit forecast of 60 billion yuan. The current market value corresponds to 2024/25 PE 47/30X, maintaining an increase in holdings rating.
Risk warning: The semiconductor boom cycle is declining, new product expansion falls short of expectations, and yield climbing falls short of expectations.