Performance review
The company's 1H23 and 2Q23 results are in line with market expectations.
The company announced 1H23 results: 1H23 income 1.501 billion yuan, year-on-year + 9.71%; return to the mother net profit-295 million yuan, year-on-year loss expanded by 259 million yuan. 2Q23 income 794 million yuan, year-on-year + 6.4%, return to the mother net profit-192 million yuan, year-on-year loss increased by 145 million yuan. The main reason for the increase in net profit loss compared with the same period last year is that the company is in a period of strategic change and smart driving investment. Performance is in line with market expectations.
Trend of development
Short-term income is under pressure, smart driving and smart core drive income drivers. 1) 1H23 Zhiyun business income is 878 million yuan, year-on-year + 3.63% position 2) Intelligence module business income is 242 million yuan, affected by the decline in commercial vehicle-related business this year, the company's strategic adjustment focus and other factors, year-on-year-17.9% position 3) Smart Core business income 223 million yuan, year-on-year + 5.0%. During the reporting period, vehicle specification-level MCU chips were recognized by the market, and shipments increased significantly to boost the smart core business. Chip products cover the mainstream vehicle factories at home and abroad and Tier1; at the same time in SoC products, Jiefa Technology SoC chips shipped more than 75 million pieces, assembled on more than 75 million vehicles around the world. The new generation of intelligent cockpit chip AC8025 will be officially lit and will be mass produced in 2024. 4) the revenue of the smart driving business is 144 million yuan, which is + 41999.9% compared with the same period last year. The volume of BYD's 1v1r program was released in the first half of the year, and the 5v5r program is expected to start in the second half of the year. The cash flow generated by 1H23's sales of goods and services is 1.72 billion yuan, which is + 10.2% compared with the same period last year.
Changes within the company put pressure on profit margins. The gross profit margin of 1H23 company is 45.6%, year-on-year-10.4ppt-2Q23 gross profit margin is 40.28%, year-on-year-9.7ppt, of which the gross profit margin of Zhiyun / think tank / mind core business is 59.6%, 14.8%, 48.3%, respectively, compared with the same period of last year-8.6/-5.8/-8.2ppt. The intensification of downstream competition and the company is in the investment period lead to the gross profit margin under pressure. The company's 1H23 R & D expenditure is 791 million yuan, and the R & D expenditure rate is 52.69%, year-on-year + 7.1ppt, maintaining a high R & D strategy. 1H23's net interest rate is-19.7%, year-on-year-17.1ppt, mainly due to increased competition in the industry and superimposed internal changes.
The company continues to develop ADAS systems and chip business to consolidate future growth points. Smart driving business, the company has reached a cooperation with Mimo Zhihang, which will help the orderly landing of the city NOH in 2024. At the same time, the company launched Horizon J2's cost-effective L2 forward-looking all-in-one solution, which has achieved mass production and signed a new strategic cooperation with Horizon in early July to build a high-order intelligent driving solution based on J5 chip and layout the integrated cockpit system. Smart core business, the importance of downstream cost management is enhanced, which is good for the company's cost-effective chip. The company achieved double breakthroughs in MCU chip business and SoC chip business.
Profit forecast and valuation
Taking into account the company's Zhiyun / intellectual module revenue lower than expected superimposed internal changes, we reduced the 2023 Universe 24-year revenue by 7.2% to 41.3 billion yuan, adjusted the 2023 net profit to-270 million yuan, and lowered the 24-year profit forecast by 54.4% to 88 million yuan. In view of the slow down of traditional business and fierce competition from smart driving, Zhiyun / intelligent module / smart driving / other 2024e Pamp S 5x/8x/14x is lowered, and the target price is lowered from 6.7% to 14 yuan (2024 SOTP), which is 30.5% higher than the current stock price.
Risk
The competition in autopilot and high-precision mapping industry continues to intensify; the participating companies continue to lose money.