3Q23 performance meets our expectations and exceeds market expectations
Carlette announced 3Q23 results: operating income of 215 million yuan, an increase of 40% over the same period last year, and net profit of 40 million yuan, an increase of 69% over the same period last year, in line with our expectations and exceeding market expectations. We believe that the outstanding performance of Cartwright 3Q23 is mainly due to: 1) smooth overseas market development, sustained and rapid revenue growth, high gross profit margin of overseas business, and improvement of gross profit margin structure; 2) thanks to the promotion of video processing equipment to 4K/8K, the company's related business revenue and profitability have been significantly improved.
Specifically, Cartwright 3Q23 gross profit margin increased to 50.8% month-on-month, which we believe is mainly due to the accelerated development of the company's overseas business and the increase in the proportion of mid-and high-end video processing equipment and other products, and the product structure is optimized. The company's 3Q23 R & D expenditure is 32.52 million yuan, accounting for 15.2% of the revenue. It continues to attach importance to the development of the R & D field. At the same time, sales expenses are still focused on helping to open up new markets. We are optimistic that Cartwright will contribute to its sustainable growth in the future with its continuous sales and R & D expenses.
Trend of development
High-end scenes such as 4K/8K and XR virtual shooting promote the rapid growth of Cartwright video processing equipment business. We believe that with the accelerated landing of 4K/8K application scenarios, the rapid growth of sales of video processing equipment and other related products, the gradual transfer of revenue structure to the middle and high end, the maturity of overlay XR virtual shooting technology, and the continuous improvement of downstream customers' requirements for video and image processing technology. We are optimistic that Cartwright video processing equipment revenue is expected to maintain rapid growth, at the same time, the high-end trend is expected to promote Carlette related business gross profit margin to continue to improve. Looking to the future, we believe that in application scenarios such as ultra-high definition video and virtual shooting, video processing equipment is expected to promote the rapid growth of Cartwright.
The development of overseas channels is progressing smoothly, gradually entering the "0-1" market breakthrough harvest period. Starting from 1Q23, Cartwright continues to promote the development of overseas distribution channels, entering overseas markets such as Europe, the United States and the Middle East by participating in exhibitions and local training, and expanding overseas customers by virtue of product performance advantages. Through the continuous efforts of 1H23 for two quarters, we believe that Carlette's overseas market has gradually entered the harvest period, and considering that the profitability of overseas products is much better than that of domestic products, we believe that overseas business is expected to ensure Carlette's rapid revenue and profit growth, and help the company continue to optimize profitability and achieve high-quality growth.
Profit forecast and valuation
We maintain the 24-year profit forecast of Carlette 2023max for 202max 282 million, with the current share price corresponding to 2023max 24e 27.9max 20.0x Pmax E. We maintain an outperform industry rating and target price of 115.0 yuan, corresponding to 2023, 24e, 38.7, and 27.8x P, E, which is still 39% higher than the current level.
Risk
Overseas business development is not as expected, profitability improvement trend is not as expected.