2Q23 performance fell short of our expectations
Jingfang Technology released its 2023 interim report. 1H23 achieved operating income of 482 million yuan, a year-on-year decrease of 22.34%; realized net profit of 76.61114 million yuan, a year-on-year decrease of 59.89%; realized net profit of 59.2439 million yuan after deducting net profit of 59.2439 million yuan, a year-on-year decrease of 65.56%. Corresponding to the 2Q23 single quarter, the company achieved operating income of 259 million yuan, a year-on-year decrease of 17.98%; realized net profit of 48.447 million yuan, a year-on-year decrease of 51.51%; and achieved net profit of 388.18,200 yuan, a year-on-year decrease of 55.65% over the previous year.
The company's downstream demand is still sluggish, and the company's performance falls short of our expectations.
Financial concerns: 1) Gross margin declined year on year and improved month on month. The company's 2Q23 gross margin was 40.7%, down 7.3 ppt from the previous year, reflecting that the company's demand for downstream security, mobile phones, etc. was still sluggish, affecting the overall capacity utilization rate; the 4.5 ppt improvement over the previous month, we believe this reflects the initial results of the company's active expansion of new business. 2) The loss of investment income is large. The company's investment in ViSiC focuses on third-generation semiconductor GaN device design. Its 800V and above high-power main drive inverter modules are under development and verification, which has a negative impact on the company's investment income.
Development trends
Focus on the release of production capacity in the automotive business and the growth of the optical device business. 1) Consumer electronics packaging and testing business: According to Canalys data, global smartphone shipments have declined for 4 consecutive quarters since 3Q22, with 2Q23 smartphone shipments falling 11% year over year. Weak consumer demand compounded the removal of inventory by the industry, putting pressure on the company's performance. 2) Vehicle regulation testing business: According to Yole estimates, global vehicle camera shipments are expected to increase from 218 million units in 2022 to 402 million units in 2028 (CAGR of 10.7%), and the automotive CIS testing process is also expected to benefit from the trend of intelligent automobiles. We believe that the company has already imported leading automotive CIS high-quality customers such as Haowei Technology, and that production capacity of automotive-grade production lines continues to rise. The automotive packaging business is expected to become an important driving force for the company's business. 3) Optical devices: The company increased its shares in Anteryon to 81.09% in March. We believe it will help promote technical collaboration and promote the business growth of optical device products in scenarios such as semiconductor equipment, machine vision, and automotive projection.
Establish overseas subsidiaries and promote international expansion. In May, the company announced the establishment of a subsidiary in Singapore as an overseas business, R&D, investment and financing center. We believe the new subsidiary is expected to reach the Southeast Asian market, be close to the needs of overseas customers, and promote the company's international layout.
Profit forecasting and valuation
As the consumer electronics market is still sluggish, we lowered the company's profit forecast for 2023 by 73% to 216 million yuan, and introduced the 2024 profit forecast of 304 million yuan for the first time. The current stock prices correspond to 55 and 39 times P/E in 2023 and 2024, respectively. We expect the company to regain its growth rate in 2024 and switch the valuation range to 2024. Based on 45 times the 2024 P/E revised target price of 20% to 21 yuan, there is still 16% room to rise from the current stock price, and maintain an outperforming industry rating.
risks
The construction of vehicle production lines fell short of expectations, and demand for security, mobile phones, and automobiles was sluggish.