In the third quarter, the company achieved operating income of 2.5 billion yuan, an increase of about 1% year on year, net profit of 278 million yuan, a year-on-year decrease of about 60%. The company vigorously increased R&D investment. In the third quarter, R&D expenses were 322 million yuan, an increase of 37% over the previous year, and the R&D expenditure rate increased 3.5 pct year on year. The company's operating income and net profit for the first three quarters were 7.53 billion yuan and 1.06 billion yuan respectively, down 1% and 49% from the previous year, respectively, mainly affected by the increase in overall period expenses due to increased R&D investment and the impact of new business development.
IDM's advantages in the entire industry chain accelerate the distribution of markets such as pan-renewable energy. The company has integrated management capabilities for the entire industry chain, such as chip design, wafer manufacturing, package testing, etc., and uses the advantages of IDM's entire industry chain to actively lay out a potential circuit. The share of application fields such as new energy, automotive electronics, and industrial control communication continues to increase. In the first half of '23, the share of the pan-renewable energy sector (vehicles and new energy) in downstream terminal applications in the company's products and solutions sector had reached 39%. The company's first power-integrated automotive grade chip passed vehicle certification and entered the automotive electronics supply chain. Safety MCU products are expected to be sold within the year, mainly used in intelligent terminals such as the Internet of Things/Industrial Internet.
The pace at which production capacity is released is stable. The production capacity of the company's 12-inch production line and packaging base in Chongqing has been gradually increased. The advanced packaging and testing base has achieved large-scale mass production, gathering high-end industrial control and automotive electronics markets; the Shenzhen 12-inch characteristic integrated circuit production line project has fully started construction and made phased progress. It is expected that the production capacity of 480,000 12-inch power chips will be put into operation by the end of 2024, and after full production, it will form a production capacity of 480,000 12-inch power chips per year.
The new product is progressing smoothly. IGBTs, third-generation compounds, sensors, modules, etc. will be growth points for the company's future products. The company's IGBT wafer manufacturing process was upgraded, and production capacity was expanded and supporting module packaging production lines were built according to planning goals; multiple gallium nitride second-generation products entered the batch supply stage, and third-generation product development work in the fields of industrial control and communications progressed in an orderly manner; in terms of module products, TMBS module sales increased dramatically in the first half of the year, and IGBT modules completed the development of various models of module products in 4 application fields, including electric welders, inverters, photovoltaics, and electric drives for new energy vehicles, etc., and IPM modules were vigorously developed Fully integrated products and entered the automotive electronics supply chain.
We forecast the company's earnings per share for 23-25 to be 1.13, 1.61, and 2.05 yuan (the original 23-24 forecast was 2.18, 2.42 yuan, which mainly lowered revenue and gross profit margins and raised the R&D expense ratio). We chose a comparable company's 23-year average PE of 55 times PE for valuation. The corresponding target price was 62.15 yuan, maintaining the buying rating.
Risk warning
R&D progress fell short of expectations; progress in new business fell short of expectations; and the recovery in downstream market sentiment fell short of expectations.