FY23 preliminary results review; expect gradual recovery in 2024

（以下内容从招银国际《FY23 preliminary results review; expect gradual recovery in 2024》研报附件原文摘录）
生益科技(600183)
Shengyi Tech unveiled its FY23 earnings preview after Tuesday's market close.Full-year revenue was RMB16.6bn (-7.9% YoY) and net profit was RMB1.16bn (-24.0% YoY), which were 3%/13% and 3%/9% lower than our/consensus estimates,respectively. For 4Q23, revenue decreased 2.3% YoY and 5.1% QoQ to RMB4.2bn.Quarterly net profit dropped more sharply by 20.8% YoY and 23.1% QoQ toRMB264.6mn. The miss was mainly due to larger-than-expected declines in ASP inboth CCL and PCB segments on weaker demand and intensified competition, whicheroded GPM, although partially offset by growing shipments of CCL products.Looking forward, we think the business will gradually recover in 2H24 afterbottoming in 1H. New CCL product, which has been certified by Nvidia and isexpected to begin the next testing phase soon, should also contribute additionalrevenue in 2024. Maintain BUY with TP adjusted to RMB19.69.
By segment, the company’s PCB subsidiary Shengyi Electronics (688183 CH)posted 2023 revenue of RMB3.3bn, down 7.4% YoY, due to heightened marketcompetition and falling telecom demand. Its revenue managed to grow 2.7%YoY and 9.1% QoQ in 4Q23, as the company reduced its prices to maintain itsmarket share. However, GPM was significantly eroded. Meanwhile, ShengyiElectronics is ramping up its production at one of its facilities (Dong Cheng IV),which also put pressure on margin. For 2024, we expect PCB segment revenueto grow ~10% YoY considering 2023 had a low base, and expect a moderaterecovery in 2H24.
For the CCL segment, excluding Shengyi Electronics’s PCB sales, revenuefrom CCL and other business was ~RMB13.3bn, down 8.0% YoY. Revenuedecreased moderately in 4Q23 on weaker demand, which was partially offsetby reduction in raw materials costs. We forecast CCL segment revenue to grow~21% YoY, with additional contribution from AI demand. Shengyi Tech’s latestultralow (UL) loss CCL product has been certified by Nvidia and is expected tobegin the next testing phase soon.
We cut our 2024E revenue forecast by 4% and lower GPM by 0.7ppt to 22.1%,considering weaker-than-expected market demand and intensified competition.We expect the business will gradually recover in 2H24 with additional revenuecontribution from new customers. Maintain BUY with adjusted TP ofRMB19.69, based on the same 22.5x 2024E P/E multiple, less than 10%lower than the stock’s 5-year historical forward P/E of 24.1x. Potentialdownside risks include: 1) worse-than-expected macro environment recovery,2) continuous ASP pressure, and 3) increasing upstream material costs.