Incidents:
On October 30, Minxin Co., Ltd. released the “Report for the Third Quarter of 2023”: in Q3 of 2023, the company achieved operating income of 103 million yuan, an increase of 37.28% over the previous year, an increase of 14.44% over the previous year; net profit loss of 29 million yuan, a year-on-year increase of 17 million yuan, and a decrease of 0.04 million yuan in month-on-month loss; loss after deduction of net profit of 32 million yuan, a year-on-year increase of 0.18 million yuan, flat year-on-month.
In the first three quarters of 2023, the company achieved revenue of 259 million yuan, a year-on-year increase of 18.82%, net profit loss of 82 million yuan, net profit loss of 82 million yuan, net profit loss of 89 million yuan after deduction of net profit.
Investment highlights:
Quarterly revenue reached a record high, gross profit improved, and an inflection point may have been reached. In the third quarter of 2023, the company achieved sales revenue of 103 million yuan, a record high, mainly due to a rapid increase in shipment volume; gross margin increased by 1.62 percentage points month-on-month, mainly due to high pressure sensor gross margin levels and product structure optimization; on the profit side, on a year-on-year basis, domestic and foreign terminal markets were relatively weak in the 2023 Q1-Q3, industry competition was fierce, leading to a year-on-year decline in gross margin, and a year-on-year decline in sales prices, leading to a year-on-year decline in gross margin, and a year-on-year decline in sales prices, and the company's estimated impairment value of 018 million yuan in the first three quarters, leading to pressure on profits. On the inventory side, as of the end of Q3 in 2023, the company's inventory was 162 million yuan, a decrease of 21.36% compared to 206 million yuan in the same period in 2022. Inventory removal has already seen results. Considering that demand for downstream consumer electronics continues to improve, the company's inventory has returned to a reasonable level. As the price of the company's acoustic products stabilizes, the shipment volume continues to increase, and the second growth curve is actively released, we believe that the company's revenue will continue to grow and gross margin will continue to recover.
MEMS acoustic sensors are on the rise in TWS headphone applications, and there is a strong recovery in acoustic sensor shipments. According to Yole data, acoustic sensors accounted for 11.41% of the MEMS market share in the MEMS industry in 2020, with a market size of $1,381 billion. Acoustic sensors are mainly used in downstream markets such as mobile phones, smart audio, and TWS headsets. Among them, the TWS headphone market has high potential for development, and is expected to grow at a CAGR of 27.94% in 2020-2026. The company's acoustic sensors are widely used on the consumer side. They account for a relatively high proportion of applications in headsets, mobile phones, smart homes, and laptops, and are also used in automotive and other fields. In 2022, the company's acoustic sensor sales volume reached 350 million units. In Q1-Q3 of 2023, the shipment volume of acoustic MEMS products showed a strong recovery trend, and the number of orders for high-end products also continued to increase. With the recovery of downstream demand, the company's performance growth trend is expected to continue.
Research and development has been increased to create the company's second growth curve, and shipments of pressure sensors for automobiles and wearable watches have been rising steadily. In the first three quarters of 2023, the company spent 58 million yuan on R&D expenses, an increase of 5.47% over the previous year. Despite the weakness in the downstream consumer electronics market, it still maintained high R&D expenditure, accumulated pressure, inertia and other products to further enrich the downstream application market, open up new space for the company, and create a second growth curve. From 2022 to the end of the third quarter of 2023, the company's shipments of automobiles, wearable pressure sensors, and acceleration products also rose steadily. Among them, the company's pressure sensors achieved a breakthrough in the field of wearable watches, and are equipped with flagship models from leading domestic manufacturers. In the future, sales volume is expected to increase as terminal products are released.
Profit forecast and investment rating: We expect the company's 2023-2025 operating revenue to be 377 million yuan, 507 million yuan, and 697 million yuan respectively, net profit of -95 million yuan, 14 million yuan, and 41 million yuan respectively; market value on October 30, 2023 is 2,809 billion yuan, corresponding PS is 7.45x, 5.54x, and 4.03x. We believe that as demand in the downstream consumer electronics market picks up, the company's pressure, acoustics, differential pressure and other sensor emissions are optimistic about the future second growth curve Growth potential, covered for the first time, and given a “buy” rating.
Risk warning: risk of downstream application fields falling short of expectations; risk of increased industry competition; risk of macroeconomic downturn; risk of declining profit levels; risk of R&D failure; risk of fluctuations in foundry prices for wafer manufacturing and packaging.