Q3's opening season drives income growth month-on-month, and panel price increases overlay educational hardware competition, resulting in year-on-year pressure on profits

3Q23 has a revenue of 7.046 billion yuan (YoY:-0.3%;QoQ:53.8%) and a net profit of 459 million yuan (YoY:-49.9%; QoQ:44.2%). The arrival of Q3's traditional peak season has led to a sharp rebound in revenue / profit compared with the same period last year, but the net profit has declined compared with the same period last year, mainly due to: 1) the rising panel prices bring cost-side pressure; 2) the price competition of the whole education machine is fierce, although shipments have increased, but the price is under pressure. Looking forward to Q4JI) the price increase of large-size panels will slow down, and the cost side may stabilize; 2) overseas inventories tend to be healthy and orders are recovering; 3) with the launch of the AI model of Sivo Education, the added value of hardware is expected to increase.

Looking forward to the future, the company is optimistic about the prospect of new business such as LED display / computing equipment / power electronics / robot.

It is predicted that the company's EPS for 23-25 will be 2.25 EPS 2.58 PE 3.42 yuan. With reference to the comparable company's median PE, the company will be given a 24-year 25x PE and a target price of 65 yuan (previous value: 82 yuan) to maintain the buy rating.

The increase in panel prices increased the pressure on the cost side, reducing the cost and efficiency driving period to improve 3Q23's gross profit margin from year-on-year-4.7pct/-3.8pct to 23.9%, and net profit margin from-6.3pct/ + 0.0pct to 6.9%. The main reasons for the decline in the company's profit margin year-on-year include: 1) the rising price of large-size panels increases the pressure on the cost side. According to Omdia, the average price of the LCD TV panel industry began to recover from the trough in September 22 and rose by 58.3% in September 23. 2) the market competition in Q3 traditional peak season is fierce, and the shipping price is under pressure. During the Q3 period of the company, the expense rate is from + 2.6pct/ to 16.2%, of which the sales / management / R & D expense rate is from + 0.4pct/+1.3pct/+1.2pct to 6.3% to 4.8% and 5.7%. The company continues to promote cost reduction and efficiency, and Q3 expenses are well controlled. In addition, Q3 interest income increased, and the financial expense rate was-0.3pct to-0.7% compared with the same period last year.

AI large model enables education / conference software and hardware integrated solution, overseas business gradually recovery sub-business, education, we can see: 1) although there is price competition in the market, but the company's product shipments have increased, the industry position has been consolidated. 2) the company launched the Schiff Eye Care Learning tablet V1Pro, gradually expanded the high school segment, and launched the Sivo education model, which is expected to increase the added value of the hardware. In the field of enterprise services, 1) the company ploughed Belt and Road Initiative's country and actively opened up new markets; 2) MAXHUB led the big model to open up internal testing, and AI value-added services expanded from education to conference scenarios. In terms of overseas business, the inventory of major customers in overseas channels gradually returned to benign, and new customer orders appeared in June-July, which is optimistic about Q4 overseas business growth opportunities. In the new business area, Q3 computing equipment / power electronics business is growing positively compared with the same period last year, and it is optimistic that cutting-edge investment will bring medium-and long-term business opportunities.

Give the target price 65 yuan and maintain the "buy" rating

In view of the pressure on prices caused by the increased competition in educational hardware, the company's revenue assumption is lowered, and the increase in expenses brought about by overseas market development is taken into account. The 23-25 net profit forecast for homing is estimated to be 15.8 shock 18.1 / 2.4 billion yuan (previous value: 21.3 shock 2.69 trillion 3.33 billion yuan). Taking into account the long-term increments brought by new businesses such as computing equipment / power electronics, the company was given a 24-year 25xPE (Wind unanimously expected a median PE of 22.7x), adjusted its target price to 65 yuan (previous value: 82 yuan), and maintained a "buy" rating.

Risk tips: new product development is slower than market expectations, interactive tablets and other market competition intensified.