The company achieved operating income of 6.22 billion yuan in the third quarter, an increase of 44% over the previous year, an increase of 38% over the previous year, and a net profit of 209 million yuan deducted from the mother, an increase of 206% over the previous year and an increase of 307% over the previous year. The company's revenue structure was gradually optimized. The semiconductor design business achieved revenue of 5.45 billion yuan in the third quarter, accounting for 87.5% of revenue. The company's average gross margin level increased from 17.3% in the second quarter to 21.8% in the third quarter, a significant improvement over the previous month.
The removal of historical inventories is nearing its end. The company actively promotes inventory removal. Prices of some products are under pressure during the inventory removal process, which has an impact on the company's profitability. By the end of the third quarter, the company's inventory removal results were remarkable. Historical inventory removal had basically been completed. The inventory value had dropped to 7.55 billion yuan, a decrease of 39% from the end of the previous year, and profitability gradually rebounded.
The recovery in downstream demand and mass production of new high-end CIS products are providing dual impetus. Downstream demand is picking up, and the company's revenue from the semiconductor design business achieved significant growth in Q3; the company's new OV50H image sensor product with 50 megapixel or more image sensors was mass-produced and delivered in the third quarter of 2023, and product revenue from the mobile phone market is expected to grow steadily. With the launch of the company's new high-end image sensors and the reduction in product costs, the company's product structure and cost structure will continue to be improved and optimized to help increase the company's product value and profitability.
The automotive market continues to grow. Under the global trend of electrification, the automotive sector, especially new energy vehicles, has maintained a growth trend. Bloomberg predicts that the estimated global sales volume of new energy in 2023 is 14.1 million units, and the Chinese market will account for about 60% of the market. With advanced and compact automotive CIS solutions, the company covers a wide range of automotive applications, including ADAS, cab interior monitoring, electronic rearview mirrors, instrument panel cameras, rearview and panoramic imaging. In recent years, the excellent performance of the company's automotive CIS products has also helped the company obtain the introduction of more new design solutions.
We forecast that the company's net profit for the year 23-25 will be 9.04, 24.2, and 3.08 billion yuan respectively (the original 23-25 forecast was 23.1 billion, 31.7, and 4.09 billion yuan, with a main reduction in revenue and gross profit margin). Based on the 24-year average PE valuation of comparable companies, a target price of 132.60 yuan was given to maintain the buying rating.
Risk warning
The recovery of the mobile phone market fell short of expectations; high-end CIS shipments fell short of expectations; mobile CIS market share declined; automobile business progress fell short of expectations; asset impairment risk.