The Q4 performance was in line with expectations. The expansion of convertible bond production brought sufficient growth momentum, maintaining that “buy” rating companies issued rapid performance reports. In 2023, it achieved revenue of 1,208 billion yuan, -18.4% year on year; net profit to mother of 132 million yuan, -46.3% year on year; deducted non-net profit of 114 million yuan, or -49.0% year on year. Corresponding to Q4 revenue of 276 million yuan, -5.2% YoY and -12.6% month-on-month; net profit to mother of 34.44 million yuan, -7.8% YoY and -13.4% month-on-month; net profit of 27.51 million yuan, +2.0% YoY and -21.9% YoY. Demand for terminal consumer electronics recovered moderately in 2023, indicating that the decline in materials revenue put pressure on operations. According to the company's main business situation, we lowered the 2023 profit forecast and maintained the 2024-2025 profit forecast. We expect net profit to be 1.32 (-0.24), 3.16, and 392 million yuan, corresponding EPS of 0.96 (-0.17), 2.30, and 2.85 yuan/share. The current stock price corresponding to 2023-2025 PE is 37.2, 15.6, and 12.5 times. The expansion of convertible bond production supports medium- to long-term growth and maintain a “buy” rating.

TV panel prices of various sizes rose in late February, and the company's pharmaceutical intermediates business is expected to resume steadily. According to TrendForce Jibang Consulting data, the prices of TV panels of all sizes rose in late February, while the prices of monitors and notebook panels remained unchanged. The company's materials before OLED sublimation achieved full coverage of the light-emitting layer and the general-purpose layer. Apart from UDC, the customer base has basically achieved full coverage of leading international OLED terminal materials companies, which is expected to benefit from the acceleration of OLED penetration brought about by the release of local OLED production capacity. In addition, the company announced that the terminal drug aletinib corresponding to PA0045, the main product in the pharmaceutical intermediates business, has been confirmed to enter the medical insurance list. It is expected that if customers increase purchases, it will be in the second half of 2024; another intermediate used in conjunction with PA0045 will increase in volume as the new dosage form is promoted, and we believe that the company's pharmaceutical intermediate business is expected to resume steadily.

The company's active repurchase and cancellation focuses on improving shareholder returns. The expansion of convertible bonds enables medium- to long-term growth. The company cancelled 618,000 shares of the company previously repurchased on January 30, 2024, accounting for 0.4485% of the total share capital before cancellation. Furthermore, in August 2023, the company announced a repurchase of 50 to 80 million yuan with its own capital. As of January 31, 2024, it had repurchased a total of 1.62 million shares, accounting for 1.1809% of the total share capital. On February 2, the company's convertible bond application was reviewed and approved by the Shanghai Stock Exchange Listing Review Committee. It plans to raise no more than 1 billion yuan of capital, of which 800 million yuan will be used for OLED pre-sublimation materials and high-end fine chemicals industry base projects, and 200 million yuan to supplement working capital. We believe that actively implementing buybacks and cancellations is conducive to raising the level of earnings per share and effectively improving the return of the company's shareholders; the expansion of convertible bond production brings sufficient growth momentum and shows confidence in the company's development.

Risk warning: demand recovery falls short of expectations, declining customer orders, display technology iterations, exchange rate fluctuations, etc.