The company released its semi-annual report for 2023. Performance declined year-on-year due to poor macroeconomic conditions. The company's R&D expenses rate increased to 21% in the first half of the year. At the same time, progress was made in market and product development in major business areas, and the future can be expected. Maintain buy ratings.
Key points to support ratings
Performance declined in the first half of the year due to macroeconomic demand. 2023H1 had revenue of 886 million yuan, -19.6% year on year, net profit of 130 million yuan, or -23.9%; net profit after deducting non-return net profit of 114 million yuan, -25.9% year on year; gross profit margin of 58.0%, +2.0 pcts year on year; net interest rate of 14.7%, -0.8 pct. 2023Q2 had revenue of 528 million yuan, -27.6%; net profit of 104 million yuan, year-on-year, -20.6%; net profit after deducting non-return net profit of 90 million yuan, -29.2%; gross profit margin of 55.6%, +0.4 pct; net interest rate of 19.65%, +1.7 pcts.
The change in performance was mainly due to the impact of macroeconomic fluctuations and delays in mass production plans for major customers.
Maintaining a high level of investment in R&D, various business lines are now highlighted. In the first half of 2023, the company invested 190 million yuan in R&D, an increase of 8.8% over the previous year. R&D investment accounted for 21.4% of revenue, an increase of 5.6 percentage points over the previous year. In the first half of the year, the company and its holding subsidiaries applied for 145 domestic and foreign intellectual property rights, adding 156 additional approved intellectual property rights. Remarkable research results were achieved. The flexible OLED and Mura compensation technology developed by the company helped domestic tablet manufacturers achieve the introduction of flexible OLED mass production, driving the company's related equipment to maintain the lead in domestic installation volume; the T7600 series parameters of the self-developed second-generation SOC tester have reached the level of mid-range SOC testing machines, and have achieved mass production on chips such as fingerprints, CIS, MCU, and TOF. The self-developed PXIE architecture testing machine has a high cost performance advantage in inspection processes such as SIP and RF inspection systems.
We believe that with its technical advantages in the field of signal and image algorithms, plus continuous investment in R&D capabilities, the company is expected to achieve technological catch-up and surpassing of high-end products in the industry in various product lines.
New products and new markets in major fields are being developed in an orderly manner. In the tablet business, the Micro-LED series test equipment has already been supplied to Chenxian Optoelectronics and Konka, and the Micro-OLED series test equipment is actively cooperating with many end customers in next-generation product development. In terms of the automotive business, it provided Geely with the first PMU process production line, provided Sunwoda with a high-value BMS test production line, and provided comprehensive and in-depth cooperation with major North American customers in thermal management, automotive chips, high-voltage modules, ICT testing, etc.; in semiconductors, various standard equipment such as testing machines, sorters, and macroscopic defect detection equipment has entered the mass production stage. We believe that the company is successfully promoting new products on the main target racetrack, and that future revenue is expected to continue to grow.
valuations
As the company is facing short-term customer mass production delays but gross margin increases at the same time, we have adjusted our profit forecast. We expect the company to achieve earnings per share of 0.82 yuan/1.23 yuan/1.71 yuan in 2023-2025, corresponding to a price-earnings ratio of 39.1 times/26.1 times/18.8 times. Maintain buy ratings.
The main risks faced by ratings
The risk of high customer concentration, the risk of the cancellation of qualified supplier qualifications for major customers, the risk of continued sluggish demand for consumer electronics, the risk of exchange rate changes, and the risk of new market development.