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Wah Lee Industrial Corp. (3010.TT) announced its 3Q 2023 quarterly consolidated financials after board approval. 3Q23 consolidated sales reached NT$19.02 billion, setting 2nd highest quarterly sales for the same quarter and posted a strong 17.6% QoQ growth over 2Q23 and an almost flat YoY sales growth. Net profit after tax and minority for 3Q23 reached NT$712 million, QoQ growth of 3.3%. 3Q23 EPS was over NT3.0 threshold and was the highest in the past four quarters which met investors’ expectations.
1~3Q23 consolidated sales reached NT$49.56 billion and posted a 13% decline from last year. The gross profit for the period was NT$4.15 billion. Gross margin for the period was 8.4%, as compared to 7.8% for the same period last year. Cumulative 1~3Q23 net profit after tax and minority was NT$1.69 billion, which translated into EPS of NT$7.16 per share.
Specialty gas prices went up a lot last year due to the Russia-Ukraine war. In order to reduce the geopolitical risks, Wah Lee joined with a business partner to set up the first electronic-grade neon purification plant in Taiwan and will become a team member of the national semiconductor supply chain. Neon is a critical raw material for the laser gases to be used in the advance semi manufacturing processes. Wah Lee’s JV plant will produce purified neon gases to be ultimately supplied to major semi fabs in the future.
With the advent of ChatGPT, generative AI has brought strong demands for AI IC chips. As the Moore law approaches its limit, advanced packaging technology such as CoWoS is greatly adopted by major semiconductor companies. A major semi customer is rapidly expanding its CoWoS capacities. Wah Lee has been the exclusive agent for the advanced semi packaging materials and has seen the demand visibility beyond next year as a result of the increasing needs for the AI servers.
As the sales momentum going into the fourth quarter, major research institutes have revised the shipment estimates of PC/NB upwards. The consumer electronic supply chain has gathered the motions again as inventories being digested and with the supports from operating system upgrades and generative AI servers. Wah Lee’s high end engineering plastics has seen its sales growing quarter by quarter in this year as customers replenish their PC/NB inventories and the rush demands for AI servers need to be fulfilled. Additionally, the connectors for 5G high speed transmissions, the new USB type C connectors for the American smartphones, and the connectors for automobile industry will keep the demands for engineering plastics going stronger.
Wah Lee’s high end CCL (Copper Clad Laminates) has also been benefitting from the growth of demands in cloud computing and AI servers and switches. Our major customers have obtained orders from various CSP (Cloud Service Providers) and speeded up their productions. AI CCL is more expensive than the traditional server CCL. According to the research institutes, AI servers will have double-digit growth in the next five years. Wah Lee’s CCL shipment will be gradually picking up.