1H23 performance is in line with our expectations
The company announced 1H23 results: revenue of 1.866 billion yuan, a decrease of 4.82% over the same period last year; net profit of 137 million yuan, an increase of 0.24% over the same period last year; and deduction of non-net profit of 92 million yuan (non-recurrent profit and loss are mainly government subsidy of 27.4 million yuan and investment income of 23.25 million yuan). Corresponding to 2Q23 income of 986 million yuan, an increase of 8.83% over the same period last year / 12.00% year-on-month increase; net profit of 69 million yuan, an increase of 32.73% / month-on-month increase of 1.34%; deduction of non-net profit of 56 million yuan. The performance is in line with our expectations.
Trend of development
The income of consumer electronics business is under short-term pressure, and automotive electronics continues to maintain high growth. 1H23's revenue from intelligent terminal functions and precision structural components and modules was 939 million yuan, down 16.52% from the same period last year. We judged that the demand from the consumer electronics industry was weak; 1H23's new energy vehicle business revenue was 701 million yuan, an increase of 27.99% over the same period last year, accounting for 37.60% of total revenue (YoY+9.64ppt). We judged that it was mainly due to the increase in customer shipments of new energy vehicles in North America. Revenue from 1H23 information storage products totaled 178 million yuan, down 34.36% from the same period last year, mainly due to sluggish market demand. Looking ahead to 2H23, we expect the company's consumer electronics revenue to be repaired as consumer electronics enters the traditional peak season and new products from international customers are launched. in addition, we continue to be optimistic about the strong development momentum of the new energy automotive products business.
Profitability remains stable and continues to invest in R & D layout for a long time. 1H23's gross profit margin was 22.92%, down 0.40ppt from the same period last year. In terms of business, 1H23 consumer electronics business gross profit margin 21.76%, year-on-year growth 1.04ppt, the company's profitability remains stable under weak industry demand, reflecting the company's operational resilience; automotive electronics business gross profit margin is 28.85%, basically the same as the same period last year; information storage business gross profit margin is 9.76%, down 13.95ppt from the same period last year. We judge that the main reason is the increase in fixed cost allocation after the decline in income. In terms of expense rate, 1H23 R & D expenditure rate was 8.62%, an increase of 1.07ppt over the same period last year, mainly due to the company's continuous investment in new energy vehicles, major customers, new product development and other areas.
Be optimistic about the expansion of new automotive electronics products, and the production capacity will continue to expand. Looking to the future, in the field of consumer electronics, the company said that it will continue to promote the expansion of products such as folding screens, and prepare to build factories in Vietnam to meet the layout of consumer electronics industry chain in Southeast Asia. In the field of automotive electronics, the company said that it will continue to promote the expansion of new businesses and new areas such as high-power wireless charging systems, core components of hydrogen fuel cells, energy storage, and will expand factories in Thailand, the United States and Mexico to further expand existing capacity and promote the internationalization of new energy vehicle business. We are optimistic that the automotive electronics business will continue to expand as production capacity expands.
Profit forecast and valuation
Considering the sluggish demand for consumer electronics, we cut the net profit forecast for 2023 Universe by 22.98% and 16.24% to 350 million yuan / 480 million yuan. The current share price corresponds to 25.3 times 2024 / 18.5 times Pax E in 2023. Maintain the outperform industry rating, and lower the target price by 11.1% to 16.00 yuan, corresponding to 2023 Universe 30.7 times / 22.4 times Pmax E in 2024, which has 21.5% upside compared to the current stock price.
Risk
Consumer electronics demand is sluggish; new energy car customer shipments fall short of expectations; Weibo Precision continues to lose money.