Maintaining the “Overweight” rating, the target price was lowered to 13.09 yuan. Revenue of $3.98 billion (YoY +44.6%) was achieved in 2023, mainly due to increased competition and the company accrued $60 million in accounts receivable and contractual asset impairment provisions to achieve net profit of 210 million yuan (YoY -10.97%) after deducting net profit from non-return to mother (YoY -10.97%). Semiconductor companies are expanding production intensively to release demand, while cleanroom manufacturers increase production capacity faster, leading to increased competition. Gross margin will continue to be under pressure in 2024, reducing EPS by 0.52 (-0.14) /0.66 (-0.23) yuan in 2024-2025, and adding 0.84 yuan to EPS in 2026. Referring to comparable companies and companies with strong ability to obtain orders, they were given 25xPE in 2024, the target price was lowered to 13.09 yuan, and the “gain” rating was maintained.
2024Q1 orders concentrated on confirming improved performance, but intense competition in the industry continued to reduce gross profit margins.
The company's 2023H1 active orders were 2.9 billion yuan, the cleanroom order revenue confirmation period was 6-12 months, and 2024Q1 orders were confirmed centrally, achieving revenue of 1,145 billion yuan (YoY +111.1%).
2024Q1's gross margin fell to 9.6% (YoY-5.3pct), which had an impact on the company's profit performance and achieved net profit of 51 million yuan (YoY -33%) after deduction.
As a domestic cleanroom company, the company has a strong ability to obtain orders and has sufficient orders in hand. As the only company with a domestic investment background among leading companies in the cleanroom industry, the company has a strong ability to receive orders in the context of domestic substitution in the semiconductor industry. At the end of 2023, orders were 2.87 billion yuan (YoY +57.9%), of which the semiconductor industry accounted for 78.1%. The gradual confirmation of in-hand orders will continue to contribute to revenue.
The cleanroom industry is rapidly expanding production, and the low gross margin situation will continue. The clean room industry is an asset-light industry. Production expansion is mainly achieved by increasing team size. The number of CR3 employees in the industry increased 13% year on year in 2023. We believe that the industry will maintain fierce competition in 2024; among them, the number of company employees increased 21% year on year, and gross margin performance will still be adversely affected by labor costs.
Risk warning: Receivables collection is not progressing as expected; order acquisition falls short of expectations.