3Q23 performance is in line with our expectations
The company announced 3Q23 results: 3Q23 revenue increased 29% year-on-year / 74% month-on-month growth to 1.696 billion yuan, and home net profit increased 11% year-on-year / 208% month-on-month growth of 260 million yuan, in line with our and market expectations. We believe that 3Q23's performance has improved greatly compared with the previous month, mainly due to: 1) the smooth introduction of new microprism products, which has gradually started mass production; 2) the opening of the traditional stock cycle for major customers in North America in the third quarter, and the improvement of profitability due to the increase in the production capacity of filter, thin film optical panels and other business; 3) the orderly landing of new business orders such as automobile HUD. Looking forward to 2024, we are optimistic that the company will consolidate its position in the filter and thin-film optical panel business, while cooperating with major North American customers to continuously promote the evolution of potential micro-innovation to more potential models.
Trend of development
The peak season of traditional stock preparation for major customers in North America has opened, and the company's new products have been introduced smoothly. According to the 2023 Q3 global smartphone market report released by Canalys, 3Q23 global smartphone market shipments fell 1% year on year, and the decline slowed down, with Apple Inc ranking second with a 17% market share and a solid market position. Based on the company's deep cooperation with major customers in North America for many years, we believe that the market position of the company's traditional filter business is stable, the release of new models has led to an increase in the production capacity of traditional business, and the company's overall gross profit margin of 3Q23 has increased by 2 ppt to 28.6% compared with the previous month. At the same time, the Pro Max products released by major North American customers in 2023 introduced 5x periscope telephoto, we believe that periscope lens can provide better zoom range and speed, crystal successfully cooperates with customers to complete the project development of microprism, along with the gradual stock of new machines, it will drive new products of microprism to provide new revenue and profit increment for optical components business in the future. We suggest that investors pay more attention to the penetration rate of North American customer prospective innovation to more potential models in the future.
Wait for the automotive electronics business to open the second growth curve. Crystal Optoelectronics is actively studying AR-HUD product upgrading, layout DLP/LCOS and other multi-technical solutions. Based on the company's years of accumulation in the optical field, we are optimistic that Crystal will continue to make efforts in the HUD field, enabling vehicle customers to upgrade intelligently. At present, the company has completed the import of Jaguar Land Rover EMA platform, Changan Deep Blue, Changan Mazda, Geely, Dongfeng and other mainframe factories, we suggest that investors wait for the company's automotive electronics business to continue to expand.
Profit forecast and valuation
The current share price corresponds to 25.7 times in 2023 and 21.4 times earnings in 2024. Considering that the new products of microprism and thin film optical panels from major customers in North America have been successfully introduced, we have raised the company's profit forecast of 2023 prime by 9% in 2024 to 637, 769 million yuan. We maintain an outperforming industry rating, and we believe that the introduction of new products will push up the company's valuation. We raise our target price by 21% to 15.0 yuan, corresponding to 32.7 times 2023 price-to-earnings ratio and 27.1 times 2024 price-to-earnings ratio, which is 27.1% higher than the current share price.
Risk
The development of automotive electronics business is not as expected, and the upgrade of mobile phone camera specifications is not as expected.