The performance in the third quarter improved significantly compared with the previous quarter, and the optimization of product structure contributed to the improvement of profits. Weir issued a third-quarter results announcement. 23Q1-Q3 realized revenue of 15.081 billion yuan (yoy-2.0%), net profit of 368 million yuan (yoy-82.9%), net profit of 130 million yuan (yoy-89.7%), of which Q3 realized revenue of 6.223 billion yuan (yoy+44.4%,qoq+37.6%) and net profit of 215 million yuan (yoy+279.6%, quarter-on-quarter turnround, qoq+467.4%). Deduct the non-return net profit of 209 million yuan (yoy+206.3%, quarter turnround, qoq+306.9%). In addition, the company's semiconductor design business achieved revenue of 5.446 billion yuan in the third quarter, accounting for a further increase to 87.5%, and downstream demand gradually picked up.
In terms of profitability, 23Q1-Q3 gross profit margin is 21.28%, year-on-year-11.4pcts, of which Q3 single-quarter gross profit margin is 21.78%, year-on-year-6.7pcts, month-on-month + 4.5pcts, indicating that the drag on profits caused by high-cost old product inventory is gradually eliminated. Low-cost and high-price new products represented by OV50H have been released one after another, and the product structure has been greatly improved. 23Q1-Q3 net interest rate is 2.39%, year-on-year-11.5pcts, of which Q3 single-quarter net interest rate is 3.41% compared with month-on-quarter, year-on-year + 6.4pcts, month-on-month + 4.5pcts.
Inventory deregulation exceeded expectations, and the profit drag was gradually eliminated. Weir bulletin shows that by the end of 2023Q3, the company's inventory level had dropped to 7.552 billion yuan, down 38.9% from 12.356 billion yuan at the end of 2022 and 23.2% from 9.828 billion yuan at the end of 2023Q2.
We judge that the main reason for Huawei's strong comeback with Mate 60 series new products, the frequent emergence of new phones of other Android brands in the second half of the year, sufficient momentum in the consumer electronics industry chain, the company to OV64B as the representative of the old inventory products in the sub-photo, telephoto application has a strong performance-to-price advantage, a substantial rebound in demand led to continuous inventory clearance, the follow-up inventory scale is expected to continue to decline to the 2023Q4 single-quarter revenue level.
OV50H took the lead in landing XIAOMI 14 full series of main shots, light and shadow hunters ushered in a new era of mobile optics. We saw that Weir's OV50H, released in January 2023, officially launched the company's first shot in the smartphone 50MP high-pixel product market, with a 1.28inch sole and a single pixel size of 1.2um, marking the company's official foray into the high-end market. In addition, OV50H has been applied to the full range of 50MP photos of XIAOMI 14 released on October 26, 2023, while using a new image sensor brand "Light and Shadow Hunter". Compared with Sony Group Corp IMX989, the original low noise of Light and Shadow Hunter 900is reduced by 50%, the dynamic range is increased by 8 times, and the power consumption is also reduced by 42% compared with other photosensitive devices of the same size.
High-end new products are released one after another, and the growth of the automotive business is expected. We believe that the company's mobile phone CIS product structure is expected to be greatly improved following the release of high-end new products, including the OV50K, which will be released at the end of the year, represented by OV50H. In addition, in terms of automotive CIS, the company has obvious cost advantages by virtue of wafer-level packaging, the product matrix is gradually broadened, and a number of hot-selling models such as Huawei occupy a high supply share. At the same time, the company actively develops overseas markets, and the momentum of automotive business growth can not be ignored.
We believe that the resonance of the mobile phone and automobile business is expected to drive the company's performance into a new upward cycle.
Profit forecast and investment advice: we maintain the company's operating income of 211.9% 2640 million yuan respectively in 2023, 2024, 2025, an increase of 5.5%, 24.6%, 19.0%, 14.1%, 32.9, 50.7 million, and 42.8%, 133.0%, 53.8%, respectively, respectively. The current stock price corresponds to 2023, 2024and 2025, PE is 86max, 3724X, respectively. The valuation for the next two years will still be attractive, maintaining the "highly recommended" rating.
Risk hint: downstream demand is lower than expected; automobile business progress is not as expected; industry competition is intensified.