Revenue and profit increased month-on-month in Q3 in 2023, and inventory removal was active
In the 11th and third quarter of 2023, the company achieved revenue of 081 billion yuan (year-on-year L96%) and net profit of 36.8 billion yuan (year-on-year 8286%); of these, in the Q3 quarter, the company achieved revenue of 622.3 billion yuan (year-on-year 1236%, 3253%), and net profit of 2,400 million yuan (75.98% year-on-year, 11-58% compared to the end of 2022). The Q3 inventory fell to 755.2 billion yuan, a decrease of about 100 million yuan from the end of 2022.
Gross margin improved month-on-month, and high-end CIS products may continue to improve profitability
Along with the gradual recovery of downstream demand, with the help of the company's new products, the company achieved significant growth in revenue from semiconductor design business. The company's semiconductor design business achieved revenue of 544.6 billion yuan, accounting for 8752% of operating income. The company's revenue structure has been gradually optimized, and the gross margin level has improved markedly month-on-month. The OV50H launched by the company uses Howell Group's PureCel @Plus -S chip stacking technology, which can achieve excellent image sensor performance and bring excellent image quality to the wide and ultra-wide rear cameras of flagship and high-end smartphones. The Xiaomi 14 series of handsets is equipped with OV50H as the main camera chip. The company is expected to gain a higher market share in the main camera CIS chip of mid-range and high-end mobile phones. With the launch of the company's new high-end image sensors and the decline in product costs, it is expected that the company's product structure and cost structure will continue to improve and optimize, and the overall profitability will increase steadily.
Investment advice
According to Counterpoint, in the third quarter of 2023, smartphone sales in China fell 3% year on year, and the year-on-year decline narrowed, indicating that the mobile phone market may have bottomed out. The Chinese smartphone market ranked first in sales volume, with vivo, OPPO, Apple, Xiaomi, Huawei, and Realme ranking second to seventh respectively. It is expected that the company will follow the recovery of the industry and continue to improve in terms of revenue and profit margins, and achieve net profit of 830 billion yuan, 242.2 billion yuan, and 325.8 billion yuan respectively from 2023 to 2025. The current stock price (October 30, 2023) corresponds to PE of Qiao&50, 5431, and 4036 times, respectively. Maintain a “first in” rating.