Incidents:
The company released its 2023 annual report. In 2023, it achieved total operating revenue of 1.21 billion yuan, up 1.4% year on year, net profit to mother 167 million yuan, up 213% year on year, and net profit after deduction of 123 million yuan, an increase of 10.27% year on year. In a single quarter, the total revenue of 2023Q4 was 340 million yuan, up 7.4% year on year.
The semiconductor business continues to grow, and the performance is basically in line with expectations
The semiconductor boom was weak in '23. According to the US SIA report, global semiconductor industry sales are expected to drop 8.2% year over year to $526.8 billion in 2023. The company's semiconductor business continued to grow against the trend, achieving revenue of 768 million yuan, an increase of 20% over the previous year. Mainly, the company's semiconductor business segment continued to enrich product types, and customer orders continued to increase. In particular, sales of wafer process chemicals such as electroplating solutions, additives, and cleaning solutions grew rapidly. In 2023, the company produced nearly 14,000 tons of semiconductor chemicals, of which wafer process chemicals accounted for more than 70% of its production.
The construction of the Shanghai Songjiang plant capacity expansion by 19,000 tons has been completed, the first phase of the Hefei Second Production Base of 17,000 tons has basically been put into operation, and various procedures for the second phase with an annual production capacity of 53,000 tons are being processed. The company's semiconductor business revenue target for 2024 is not less than 1 billion yuan.
The slump in the paint business is dragging down performance
The paint sector business was affected by adverse factors such as the sluggish market environment in the construction industry and a sharp drop in the sales price of paint products. In '23, revenue was 444 million yuan, down 20% from the previous year, and its share continued to decline.
The photoresist and grinding fluid projects are progressing smoothly
Photoresist products have achieved revenue of more than 4 million yuan in 23 years. I-line and KrF photoresists have mass production capacity. Samples have been provided to more than 20 clients for testing and verification. ArF photoresists have carried out testing and verification work at many domestic wafer manufacturers, and the technical indicators of some models of products are close to those of the target products. The Wslurry series of grinding liquid products has been successfully verified on the client side, and many products have already been sold. Furthermore, the company continues to deepen its investment layout in the field of key process materials for integrated circuits, collaborate with the company's main business, and continuously expand and strengthen the company's product strength and industry influence.
Profit Forecasts, Valuations, and Ratings
Due to the weakness of the paint business, we expect the company's revenue in 2024-26 to be 17.23/3.3 billion yuan, respectively, with year-on-year growth rates of 41%/37%/42%, respectively, net profit to mother of 2.0/3.5/5.1 billion yuan, 21%/43% year-on-year growth rates, EPS 0.64/1.13/1.61 yuan/share, respectively, and a 3-year CAGR of 45%. In view of the rapid growth of the company's chemical business for wafer processing and the positive prospects for the photoresist business, we gave the company 65 times PE in 24 years, corresponding to a target price of 41.6 yuan, maintaining the “gain” rating.
Risk warning: The development of the wafer chemicals market fell short of expectations, the photoresist business progressed slower than expected, and production capacity construction at the new base fell short of expectations