Core views:
Incident: The company announced its semi-annual report for 2023. In the first half of 2023, it achieved operating income of 980 million yuan, a year-on-year decrease of 29.59%; realized net profit of 223 million yuan, a year-on-year decrease of 54.12%; realized net profit of 221 million yuan after deducting non-return net profit of 221 million yuan, a year-on-year decrease of 54.03%.
Comment: The recovery of customer demand has been suspended and is under pressure in the short term; the construction of production capacity bases is progressing steadily. As downstream customer production expectations become clear, performance is expected to gradually improve. On the revenue side, H1 achieved revenue of 980 million yuan (YOY -29.59%) in '23. By business, the company's self-produced business achieved revenue of 566 million yuan (YOY -31.31%) in the first half of the year, mainly due to weak customer demand for the company's core product, porcelain dielectric capacitors, which led to a decline in core product sales. Looking at the self-produced business segment, porcelain dielectric capacitors, filters and other electronic components achieved revenue of 502 million yuan (YOY -36.89%), 112 million yuan (YOY -2.41%), and 52 million yuan (YOY +225.35%), respectively. The agency business achieved revenue of 412 million yuan (YOY -26.88%), mainly because some core customers are greatly affected by external markets, future demand expectations continue to decline, and procurement efforts have been reduced. On the profit side, net profit from H1 fell 54.12% year on year in '23, and the decline was faster than revenue. Main factors: (1) Overall gross margin decreased by 8.49 pct to 46.47% year-on-year in the first half of the year. (2) The overall cost rate level has increased.
The cost rate level for H1 companies increased by 4.67 pct to 15.29% year-on-year in '23. Among them, the sales/financial expense ratio was 1.50 pct/-0.09pct year on year to 4.29%/0.24%; the management fee rate increased by 2.03 pct to 5.96% year on year, mainly due to the company's expansion of new business, professional service fees, and long-term asset depreciation and amortization expenses; the R&D expense rate increased 1.23 pct to 4.81% year on year, mainly due to the continuous increase in R&D investment in porcelain capacitors, filters, microwave modules, microcontrollers and microprocessors, ceramic circuit boards, ceramic tube cases, etc. During the reporting period, the company continued to promote the layout of industrial bases in Beijing, Suzhou, Chengdu, Hefei and other places.
Profit forecast and investment suggestions: EPS is expected to be 2.52/3.46/4.56 yuan/share in 23-25. Considering that the company's card slots are supported in many key areas, it is expected to take the lead in benefiting from downstream business improvement expectations, give 23 times PE, corresponding to a reasonable value of 75.70 yuan/share, and maintain the “increase in holdings” rating.
Risk warning: low expectations for new product expansion, low expectations for equipment demand and delivery, policy adjustments, etc.