Performance review
The company's 2Q23 performance meets our expectations.
Tianzhun Technology publishes its 2023 semi-annual report. 1H23 achieved an operating income of 513 million yuan, an increase of 10.4% over the same period last year; a net profit of 4.2565 million yuan, an increase of 36.2% over the same period last year; and a non-return net profit loss of 21.8751 million yuan. Corresponding to the single quarter of 2Q23, the company achieved operating income of 331 million yuan, an increase of 2.5% over the same period last year, a net profit of 37.697 million yuan, an increase of 2.7% over the same period last year, and a net profit of 14.5343 million yuan, down 63.7% from the same period last year. The company's 2Q23 performance is in line with our expectations.
Financial concerns: 1) Gross profit margin declined. The company's 2Q23 gross profit margin was 37.3%, down 8.9 ppt from the same period last year. We believe that it is mainly due to the increase in the proportion of low-margin business and the intensification of competition in some products, dragging down the gross profit margin. 2) the impact of equity incentive fees is greater. The net profit affected by 1H23 share payment is 16.013 million yuan. Excluding the impact of share payment, the net profit is 20.2695 million yuan, down 19.0% from the same period last year. 3) Cash flow shows signs of improvement. 1H23 company operating cash flow net outflow of 1.0044 million yuan, compared with 1H22 net outflow of 292 million yuan significantly narrowed; 2Q23 operating cash flow to achieve a net inflow, mainly benefiting from the return of goods receivable funds and the increase in advance receivables, the company's cash flow quality showed signs of improvement.
Trend of development
The company's layout of a number of new business ushered in positive progress. 1) Photovoltaic: the company has launched a new generation of silicon wafer sorter with a testing speed of 18,000 wafers per hour and has obtained batch orders. At the same time, the company's new layout of copper-plated graphic equipment, the company expects the first generation of prototype will be sent to 3Q23 for trial. 2) Semiconductor: in August, the company announced that the TB1000, the first 12-inch wafer 65-90nm process open-field testing equipment, was officially delivered to customers for trial, and the semiconductor business made positive progress. We believe that there is a large domestic space in the semiconductor front wafer volume testing industry, and the company's successful sample trial confirms the company's strong technical strength and is expected to fully benefit from the increase in downstream demand. 3) PCB:8 monthly company held a press conference to launch CO2 laser drilling equipment, which is suitable for HDI, IC carrier board, soft and hard composite board, and entered the trial stage of delivering customers. So far, the company's PCB plate has launched LDI, AOI, drilling machines and other equipment to jointly support the volume growth of PCB business. 4) Intelligent driving domain control: according to the company announcement, the company's domain control products have successively passed IAFT16949, ISO26262 and other important certification, and have been designated by a customer, and the company expects to have the conditions for mass production within this year.
1H23's process equipment and intelligent driving programs have recorded rapid growth. 1) the revenue of visual process equipment 1H23 reached 125 million yuan, an increase of 29.7% over the same period last year. We believe that it mainly benefited from the increase in revenue from key projects related to automobile electrification and intelligence in the company's auto automation production line. 2) the revenue of intelligent driving solution products reached 38.4154 million yuan, an increase of 94.7% over the same period last year. We believe that this reflects the pick-up of demand in the intelligent Internet-connected automobile market.
Profit forecast and valuation
We basically maintain our earnings forecast for 2023-24, and the current share prices correspond to 2023, 32.7 and 25.1 times Pamp E, respectively. Based on the SOTP valuation, we maintain an outperform industry rating and a target price of 43.50 yuan, corresponding to 39.1,30.0 times Pmax E in 2023 and 2024, which is still 20% upside compared with the current level.
Risk
Consumer electronics demand is in the doldrums, new business progress is not as expected, competition in the industry is intensified, and operating capacity is declining.