Huaguang New Materials announced the semi-annual report for 2023. In the first half of 2023, the company achieved operating income of 703 million yuan, an increase of 13.08% over the previous year, and non-net profit of 29 million yuan after deducting non-net profit from the mother, an increase of 247.35% over the previous year.
Profit growth in the first half of 2023 was mainly due to reduced product costs and increased efficiency and a recovery in raw material prices. The company increased the development of new products and markets in 2023, increased sales volume and sales revenue in the first half of the year, carried out process optimization and equipment transformation, and promoted cost reduction and efficiency. As raw materials and silver rose steadily, gross margin rebounded, and net profit increased. 1) In the first half of 2023, the company's gross sales margin and net sales margin were 13.73%/4.60%, respectively, a year-on-year change of 2.9 pct/3.0 pct. 2) The three fee rates fell 0.08 percentage points year over year to 5.44%. Among them, sales, management, and financial expense ratios changed by -0.01, -0.16, and 0.09 percentage points year-on-year to 0.99%, 2.71%, and 1.74%. In the first half of 2023, the company's R&D expenses accounted for 3.28% of revenue, down 0.16 percentage points from the previous year.
Continue to cultivate mature markets, actively expand new tracks such as electronics and new energy vehicles, and achieve steady growth in sales volume and sales revenue. In mature markets, seizing the country's opportunity to promote a green energy strategy, the sales revenue of the power and electrical industry increased by more than 10% over the same period last year. In emerging markets, the company continued to launch welding and connecting materials in the electronics field, with sales revenue increasing by more than 50% year on year; actively expanding the NEV industry, exploring demand for brazing materials for NEV electronic control, batteries, thermal management and motor systems, achieving a 70% year-on-year increase in sales revenue; and actively expanding other industrial application industries, with sales revenue increasing by more than 50% year-on-year.
With the end of the global COVID-19 pandemic, the company has increased the expansion of overseas markets, dug deeper into the needs of overseas markets in the fields of refrigeration, power, electricity and electronics, and accelerated the “Huakai Global” internationalization strategy.
Continue to increase investment in R&D, carry out research and innovation on new products and technologies, and create the company's second growth curve. The company has increased research and development of electronic silver paste products, launched different series of conductive silver paste products in the field of flexible circuits and electronic components to achieve rapid growth in sales revenue, and developed conductive adhesive products used in chip packaging and active silver solder paste products used in IGBTs. During the reporting period, the construction of a production line for tin-based solders in the electronics sector was completed. After a certain period of batch verification by customers, tin-based solder products will be sold on a large scale in the future.
Profit forecasting and investment evaluation. We expect Huaguang New Material's net profit to be 0.58, 0.86, and 122 million yuan in 2023-2025, corresponding EPS to 0.65, 0.96, and 1.38 yuan, respectively. Overall, we gave Huaguang New Materials a valuation range of 32-35 times PE in 2023. The corresponding reasonable value range was 20.80-22.75 yuan, maintaining the “superior to market” investment rating.
Risk warning. Investment in production capacity under construction fell short of expectations; the macroeconomic economy declined; market prices of raw materials fell.