The company's 3Q23 profit was slightly lower than our expectations
Siweitu announced new 3Q23 results: 3Q23 revenue was 817 million yuan, +15.17%; net profit was -200 million yuan, 3Q22 was -104 million yuan, losses increased; net profit excluding non-attributable income was -210 million yuan, 3Q22 was -104 million yuan, losses increased. The company experienced organizational changes during the reporting period, continued to invest in intelligent driving, and Q3 profit was slightly lower than our expectations.
Development trends
The volume of smart driving drives revenue, and changes in the revenue structure have put pressure on profits in the short term. 1) Revenue side: 3Q23 The company's revenue was 817 million yuan, +15.17% year-on-year, achieving a slight increase. Benefiting from an increase in the second growth curve, the shipment volume of the self-developed chip AC8015 and the steady progress of intelligent driving. 2) Profit side: 3Q23 The company's gross profit margin was 36.5%, year-on-year -20.9ppt, month-on-month -3.8ppt, mainly due to an increase in the share of smart driving; net profit margin after deducting non-return net interest rate -25%, year-on-year -22ppt, and -1 ppt compared to 1-ppt. This is a continuous high investment in smart driving and smart chip businesses, leading to profit margin compression. 3) Expense side: 3Q23 The company's management expenses rate of 10% remained basically the same. During the reporting period, the company increased marketing, with a sales cost rate of +2ppt to 9.3%; R&D expenses increased 14.7% year on year to 419 million yuan, and R&D expenses rate 51.2%. The company focused on cutting-edge business development such as ADAS and chips, and continued to invest heavily in R&D. 4) Order side: 3Q23 The company received cash flow of 995 million yuan from sales of goods and services, +22.75% over the same period, with marginal repayment improving.
Differentiated products promote the transformation of traditional businesses and the continuous expansion of multi-party cooperation. In the field of Zhiyun, in response to pain points such as slow updates of traditional high-precision maps, the company released HD Lite, a cost-effective and lightweight map product at the October 2023 User Conference. In terms of international cooperation, the company participated in the “Belt and Road” international cooperation summit forum and signed a cooperation agreement with the China-Africa Chamber of Commerce to build mutual aid map services for Ethiopian enterprises and the public; in the field of intelligent driving, the company released the advanced smart driving program NOP Lite in October. Using the new Horizon Journey 3 chip, the solution is cost-effective, and targets the mainstream car market, forming a differentiated competitive advantage; in the smart cabin field, the company launched a “thoughtful” smart cabin model during the reporting period, which can be integrated and upgraded with users' existing cockpit intelligent interaction systems to empower users with multi-modal interactive technology Promotion; In the field of Zhixin, AC8025 has been designated by international car companies, and the company expects to cover a total of 5 million vehicles. In addition to this, the company has reached a comprehensive strategic cooperation with Puhua Basic Software to jointly promote the iterative expansion of various products such as automotive chips, smart cockpits, and intelligent driving domain controllers.
Profit forecasting and valuation
We kept our profit forecast unchanged, kept our outperforming industry rating and target price unchanged at $14 (based on 2024 SOTP), which is 43.9% upward from the current stock price.
risks
Competition in the autonomous driving and high-precision map industries continues to intensify; participating companies continue to lose money.