3Q23's homing net profit was lower than Huatai expected, inventory levels increased month-on-month, and the cost rate reached a new high, China Resources 3Q23 revenue of 2.5 billion yuan, an increase of 0.6 per cent over the same period last year. The net profit of homing is 278 million yuan, down 60.4% from the same period last year, which is lower than our expected 428 million yuan. The main reasons are: 1) the downward pressure on the price of power products is not reduced, and the overall gross profit margin of the company is down 5.5 pm / month-on-month. 2) Shenzhen 12-inch line, closed test base climbing, R & D / management expense rate increased 2.5/1.7pp month-on-month. Considering that the inventory level of the company and its peers remained high in the third quarter, we lowered our annual revenue forecast for 23-24-25 by 3%, and reduced our home net profit forecast by 16% to 2.394 billion yuan. We give the company 3.5x 2024E PB, which is higher than the average 3.1x premium of comparable companies, mainly due to the continuous optimization of the company's product structure, full capacity utilization, and maintain the "buy" rating of the target price of 63.27 yuan.
Review: the inventory level is not reduced; the expense rate is at a new high.
China Resources Micro 3Q23 earned 2.5 billion yuan, up 0.6 per cent from the same period last year. The gross profit margin was 31.7%, a year-on-year / month-on-month decline of 5.5/2.2pp, reflecting that the price pressure of power materials has not eased, and the industry competition is fierce; at the same time, the company's 3Q23 inventory increased by 7.4% month-on-month, indicating that the company may still be under the logic of destocking in the fourth quarter. 3Q23's R & D expense rate is 12.9%, a year-on-year / month-on-month increase of 3.4/2.5pp, focusing on chip design, mask manufacturing, wafer manufacturing, packaging and testing industry chain integrated capacity building, forward-looking layout of SiC, GaN track. The net profit of 3Q23 was 278 million yuan, down 60.4% from the same period last year, which was lower than we expected.
Prospect: the coexistence of first-hand logic of inventory elimination and preemption of new market
We believe that in the fourth quarter, the industry is still under the logic of inventory removal, and the company's gross profit margin may continue to be under pressure, forcing the company to more actively develop the 12-inch line to reduce costs and increase efficiency, and promote three and a half generations, high-end, modular product research and development. to seize the first hand in the next round of market competition. As a result, we reduce the company's revenue forecast of 2023, 2024, and 2025 by 3%, and raise the company's 2023 expense rate, assuming 1.3pp. We are optimistic about the company:
1) the utilization rate of capacity remains high, and downstream new energy vehicles, photovoltaic, industrial control and consumer electronics are flexibly adjusted. 2) the climbing of 12-inch production lines in Chongqing and Shenzhen partially offset the price shock; 3) the expansion of new businesses such as SiC, GaN, mask, etc.
Maintain the "buy" rating and maintain the target price of 63.27 yuan
Considering the increasing competition in the industry and the downward pressure on prices, we lowered our annual income forecast for 23-24-25 by 3%, and lowered the net profit forecast for home return by 16% to RMB 2.290 billion. We give the company 3.5x 2024E PB, which is higher than the average 3.1x premium of comparable companies, mainly due to the continuous optimization of the company's product structure, full capacity utilization, and maintain the "buy" rating of the target price of 63.27 yuan.
Risk hint: the semiconductor industry enters the downcycle risk, new technology and product research and development do not meet the expected risk.