Events:
On August 22, the company released its mid-year report of 2023. According to the announcement, in the first half of 2023, the company realized revenue of 884 million yuan, YoY-24.09%; realized net profit of 128 million yuan, YoY-46.96%; realized non-return net profit of 124 million yuan, YoY-45.38%.
In the first half of the year, the operation showed resilience, and the Q2 performance improved significantly from the previous month:
The company's operation in the first half of 23 years showed strong resilience, and the month-on-month ratio gradually improved under the background of the downward cycle of the semiconductor industry and weak terminal demand. In a single quarter, Q2 company achieved revenue of 468 million yuan, QoQ+12.54%; return net profit of 70 million yuan, QoQ+19.63%; deducted non-return net profit of 67 million yuan, QoQ+16.39%. The obvious improvement in revenue and profit compared with the previous month is mainly due to the recovery of consumer market confidence, the decline of market inventory level to a reasonable water level, and the stability of demand for various product lines. In terms of profit margin, Q2's single-quarter gross profit is 38.23% and the net profit is 16.23% and 3.41pcts respectively. Mainly due to the month-on-month improvement in Q2 single-quarter expenses, the sales expense rate, management expense rate, R & D expense rate and financial expense rate are 12.65%, 3.14%, 13.20%, 2.42%, respectively, except for the R & D expense rate. The significant improvement in the financial expense rate, YoY-1.15pcts,QoQ-3.51pcts, is mainly due to the increase in exchange earnings.
Layout Wisdom couplet is widely used, and the vehicle business needs to be expanded urgently:
Smart thing couplet: the intelligent thing couplet market fragmentation degree is high, the product power, the performance-to-price ratio is the core competitiveness. At present, the company's products have become the main supply of major brand manufacturers, accounting for more than 60% of some well-known brands. In the first half of 2023, Wisdom achieved 141 million yuan in revenue and a gross profit margin of 33.63% for YoY-37.52%;. Vehicle business: with the leading position of ISP chip, the company successfully cut into the field of vehicle electronics. In the first half of 2023, the revenue of smart car business was 73 million yuan, and the gross profit margin of YoY-45.19%; was 39.54%, which was higher than the company's average gross profit margin. According to the announcement, the company's new generation of ISP products are more cost-effective and have successfully replaced the import scheme and obtained the introduction of many brand car manufacturers and Tier1 programs. With the gradual maturity of the CMS/DMS/OMS/AVM/DVR application of the pre-installed chip products in the car, the company is expected to increase its market share in the future.
Edge computing needs open room for growth, and machine vision empowers professional video processing:
The gradual miniaturization of the large model of artificial intelligence brings the improvement of the computing power of the edge side. Video, as one of the carriers with the largest information content, is an important application scene for the landing of the edge side model. According to the announcement, the company's SoC chip can now complete API access to large models such as ChatGPT, as well as video and audio tasks at the same time. In the first half of 2023, the company's professional video processing products achieved revenue of 614 million yuan, with a gross profit margin of 38.12% for YoY-21.26%;. From a product point of view, the company's image processing ISP has evolved to the 7th generation, leading the industry in image enhancement, noise reduction, wide dynamic, color restoration, low illumination and so on; in terms of IPC SoC, it has launched new products such as full-HD real-time high-performance intelligent network processor SoC chip and support for multi-channel ultra-HD DVR/NVR SoC; in terms of industrial robots, special machine vision chips will be launched soon. The company continues to increase its investment in video research and development to build deep barriers to competition. With the further development of artificial intelligence technology and the continuous improvement of hardware performance, video multimedia terminals will open a broader market space, and the company is expected to benefit deeply.
Investment advice:
We estimate that the company's income from 2023 to 2025 will be 2.064 billion yuan, 2.436 billion yuan and 2.968 billion yuan respectively, and the net profit will be 284 million yuan, 347 million yuan and 436 million yuan respectively, and the corresponding PE will be 39 times, 32 times and 25 times respectively. The company's short-term performance is affected by weak downstream demand, but as a domestic scarce video surveillance chip manufacturer, it is expected to benefit from new product volume and market share expansion. Reference to comparable companies such as Jingchen, Ruixin Micro, Beijing Junzheng, etc., with an average PE of 54.39X in 2023, giving the company a 2023 PE45X, corresponding to a six-month target price of 55.35 yuan. Maintain the Buy-An investment rating.
Risk hints: market competition aggravates risks; demand recovery is not as expected; international trade friction risk.