Wah Lee Industrial : Quarterly Management Report Q4 2023

Wah Lee Industrial Corp. (3010.TT)

2023 4Q Management Report

March 19, 2024

Company Basic Information

FY2023 Consolidated Results Announcement

Closing Price (18/03/2024)

NT$108.0

Wah Lee's FY2023 sales reached

NT$66,782 million, a 9.23%

YoY

decline amid gradual inventory digestion among customers and sluggish

52 WK High

NT$116.0

macro-economic condition.

WL's

sales performance was relatively

52 WK Low

NT$79.4

stable as compared to 12-30% sales decline among the distributors.

Book Value/share

NT$78.6

Shares on Issue (M)

236.2

 Information Communication

Technology

12.38% YoY decline:

ICT

Market Cap (USD M)

832

sector's sales was adversely

affected by

the slow demands

from

QFII Holding (%)

13.8

consumer electronics, smartphones, and home appliances, as a result of

Monthly Avg Daily Turn

NT$100M

the inflation and high interest rates. It's also hindered by the

Key Financial Indicators

geopolitical conflicts to move productions out of China and Chinese

people's own conservative consumption behaviors after the Covid.

2021

2022

2023

 Semiconductor 7.87% YoY decline: While Wah Lee's leading foundry

ROE

19.1%

15.0%

11.9%

Debt/Asset

61.0%

62.0%

59.0%

customer maintained high capacity utilization mostly because of the

Cash Conversion

advanced manufacturing nodes, the overall semi industry was still faced

Days

76.5

76.0

81.8

with high inventory levels from the demand sides. It is expected the

inventory de-stocking of chips will last over the 1H of this year.

3010 WL

Price Chart (1 yr)

 FPD 5.24% YoY decline: The FPD FY2023 sales showed a YoY decline

because in the beginning of 2022 the electronic whiteboards were

shipped in large quantities to avoid the delay of delivery due to the

Chinese New Year holidays. The electronic whiteboard sales had

gradually returned in 2H23. FPD 4Q23 quarterly sales grew 19.4%

YoY.

 Green Energy 42.47% YoY decline: The mainland Chinese government

phased out their EV subsidy policy starting in 2023. The rush to

Product Mix (FY2023)

purchase EVs before the phase out has made the sales of li-battery

cathode and anode materials hiked up the demand in 2H 2022 resulting

in the YoY decline of the green energy sector in 2023. On the other

hand, Wah Lee's solar power stations has reached 65MW in total

capacity by the end of 2023 and has delivered stable sales and profits

for the group.

FY2023 EPS: NT$8.96 and a cash dividend of NT$5.2/share was

announced, dividend payout ratio was 58%

Full year 2023 consolidated sales totaled NT$66,782M. FY2023 gross

profit was NT$5,526M with gross margin of 8.28%. FY23 GM was higher

than the FY22 GM of 7.57% mostly benefitted from the reversals of

reserves for losses in slow-moving and write-off of inventory starting in

Wah Lee Consolidated Entities

2H22, as inventory was gradually digested along the quarters in 2023.

include Wah Lee Taiwan and

FY2023 operating expense ratio was 4.53%, which was higher than a year

subsidiaries in China, Singapore,

Thailand, Vietnam, and Indonesia.

ago as travel and entertainment expenses increased after the end of Covid,

IR Contact

and operating margin was

3.75%.

Operating profit was NT$2,501M.

Non-operating profit was NT$577M, mainly contributed from long-term

Eric Lin

[phone] ext.22061

investment companies. Pretax profit totaled NT$3,078M. FY2023 after tax

[e-mail]

and minority profit was NT$2,113M, with EPS of NT$8.96. A cash

dividend of NT$5.2/share was proposed by the Board and will be approved

in the AGM on May 28.

Wah Lee Industrial Corp. (3010.TT)

2023 4Q Management Report

March 19, 2024

2024 Outlook

We are confident the year of 2024 will be a year of recovery. Due to the low basis of monthly sales in 2023, the cumulative Jan.-Feb. 2024 consolidated sales has grown by 22.53% YoY. Wah Lee's geographic expansions were targeted at the fast-growing markets: China's GDP growth target for 2024 is 5.3%; ASEAN countries' overall GDP growth is expected to be 4.9%; India's GDP growth aims for 7%; while US, Japan, Mexico, and Europe markets all expect to have satisfactory growth rates. Wah Lee plans to aggressively expand its market shares in these major markets. From the application's perspectives, smartphones and NB, PC are expected to see sales volume to resume growth momentum in 2024. With the advent of generative AI, the consumer and enterprise AI sectors will both see exponential demand growths within the next few years. According to industry research, AI servers will grow at a CAGR of 45% within the year from 2022-2026. Wah Lee provides a comprehensive portfolio of raw materials for AI servers or other high performance computing or communication device. From high-end engineering plastics that go into the connectors, sockets for GPU/CPU, and chassis, to the dry films and CCLs required for the production of high-end PCB for AI servers or switches. Furthermore, semiconductor raw materials including photoresist, CMP slurry, bulk chemicals, specialty gases, and spare parts were comprehensively provided by Wah Lee to foundry and DRAM makers for making all the critical GPU/CPU/Memory chips that will make up for the backbone of an AI server or other AI device. EV market is another high potential growth area. By the year of 2030, EV is expected to grow at a CAGR of 17.3%. Wah Lee has already provided GaN and SiC components and device that are required in the high electricity voltage working environment of EV and charging stations. The related 3rd generation compound semiconductor sales in Wah Lee has grown by 46% YoY in 2023. Wah Lee has well positioned itself to lead in the continuous development of mega technology trends in the modern world. We will periodically update our latest progress in different frontiers of industries to investors and shareholders.

Operating Result (M)	2021	2022	2023	1Q21	2Q21	3Q21	4Q21	1Q22	2Q22	3Q22	4Q22	1Q23	2Q23	3Q23	4Q23
Total Rev	70,515	73,570	66,782	16,284	16,866	18,756	18,610	19,510	18,336	19,149	16,575	14,378	16,167	19,019	17,218
Gross Profit	5,983	5,567	5,526	1,438	1,496	1,572	1,476	1,558	1,428	1,438	1,143	1,094	1,510	1,548	1,374
Operating Profit	3,073	2,643	2,502	726	758	804	784	802	697	704	440	431	749	699	623
After Tax Profit	2,843	2,485	2,114	597	641	842	764	768	657	737	323	289	689	712	423
Shares Ourstanding	236.02	236.02	236.24	231.40	231.40	236.02	236.02	236.02	236.02	236.02	236.02	236.02	236.02	236.02	236.24
EPS (NTD)	12.05	10.53	8.96	2.53	2.71	3.57	3.24	3.26	2.78	3.12	1.37	1.22	2.92	3.02	1.80
Operating Result (%)
GP Margin	8.5%	7.6%	8.3%	8.8%	8.9%	8.4%	7.9%	8.0%	7.8%	7.5%	6.9%	7.6%	9.3%	8.1%	8.0%
OP Margin	4.4%	3.6%	3.7%	4.5%	4.5%	4.3%	4.2%	4.1%	3.8%	3.7%	2.7%	3.0%	4.6%	3.7%	3.6%
AT Profit Margin	4.0%	3.4%	3.2%	3.7%	3.8%	4.5%	4.1%	3.9%	3.6%	3.8%	1.9%	2.0%	4.3%	3.7%	2.5%
Growth % YoY
Sales YoY	19.4%	4.3%	-9.2%	31.8%	13.7%	16.1%	18.3%	19.8%	8.7%	2.1%	-10.9%	-26.3%	-11.8%	-0.7%	3.9%
GP YoY	24.6%	-7.0%	-0.7%	43.1%	25.2%	22.1%	12.4%	8.3%	-4.5%	-8.5%	-22.6%	-29.8%	5.7%	7.6%	20.2%
OP YoY	45.8%	-14.0%	-5.3%	70.8%	39.1%	26.4%	56.5%	10.5%	-8.0%	-12.4%	-43.9%	-46.3%	7.5%	-0.7%	41.6%
AT Profit YoY	52.9%	-12.6%	-14.9%	73.5%	45.7%	32.4%	74.0%	28.6%	2.5%	-12.5%	-57.7%	-62.4%	4.9%	-3.4%	31.0%

Safe Harbor Notice

Wah Lee Industrial Corp. (the Company) has made forward-looking statements in this report. The forward-looking statements contain information regarding, among other things, the Company's financial condition, future expansion plans and business strategies. The Company has based these forward-looking statements on its current expectations and projections about future events. Although the Company believes that these expectations and projections are reasonable, such forward-looking statements are inherently subject to risks, uncertainties and assumptions about it.

The Company undertakes no obligation to publicly update or revise any forward-looking statements whether as a result of new information, future events or otherwise. In light of these risks, uncertainties and assumptions, the forward-looking events discussed in this report might not occur and the actual result could differ materially from those anticipated in these forward-looking statements.