Incidents:
The company released the financial report for the third quarter of 2023: the company achieved revenue of 5.594 billion yuan (-9.45% year-on-year), net profit of 517 million yuan (-13.97% year-on-year), net profit of 517 million yuan (-13.97% year-on-year), and net profit after deduction of 493 million yuan (+0.66% year-on-year) in the first three quarters of 2023.
In 2023Q3, the company achieved operating income of 2,248 billion yuan (-9.50% yoy, +39.8% yoy), net profit of 324 million yuan (-22.42% yoy, 561.22% yoy), net profit after deducting non-return net profit of 348 million yuan (+7.95% yoy, +1022.58%), and gross margin of 28.57% (+2.58pct yoy).
Comment:
Q3 did not include a significant month-on-month increase, expanding new business to create a second growth curve. The company continues to maintain application research on basic materials such as radio frequency materials and magnetic materials, strengthen customer coverage of products such as antennas and modules, wireless charging and modules, UWB and modules, LCP modules, high-performance precision connectors, and passive components, and actively develop new customers. At present, the company has carried out preliminary research work on 6G-related technologies. The company is also actively building a second growth curve, vigorously expanding business opportunities in the fields of commercial satellite communications, smart cars, the Internet of Things, artificial intelligence, service robots, etc., further expanding the share of sales scale, and accelerating the transition from consumer electronics to the “consumer electronics+satellite communication+smart car” multi-business development stage. Currently, consumer electronics accounts for 80% of the main business, mainly antennas (1/3), wireless charging modules (1/3), and structural components (1/3).
New businesses include satellite communications, automobiles, connectors, passive components, and UWB module products, which account for 20% of the main business.
New business products are progressing rapidly, and business optimization and transformation are beginning to bear fruit. In the field of automotive connectivity products, the company has obtained domestic and foreign OEMs such as Tesla, Volkswagen, Changan Automobile, American Visteon, Foxconn, etc., and Tier 1 supply qualifications. With the continuous development of the NEV industry, the company's automotive interconnection business is expected to usher in major development opportunities in the future. Furthermore, driven by 5G technology, artificial intelligence, and sensor technology, the Internet of Things has entered a new period of rapid development. Among them, smart homes are a prominent field of rapid development in the IoT industry. The company has reached a strategic cooperation with NXP, has complementary advantages, and jointly promoted the application of UWB in the fields of the Internet of Things and the Internet of Vehicles, and has accumulated rich experience in scenario applications. As UWB technology continues to develop and the smart home market continues to grow, the company is expected to take advantage of its leading edge to seize emerging business growth opportunities.
Profit forecast, valuation and rating: Considering the pressure on the company's downstream consumer electronics business in the first three quarters of 2023, we lowered the company's net profit forecast for 23-24 to 756/903 billion yuan (downgraded ratio: 26.67%/27.76%), and added the 25-year net profit forecast to 1,146 billion yuan, corresponding to the current PE valuation of 32X/27X/21X. We are optimistic about the company's competitiveness in mature businesses such as antennas, as well as the layout and growth of new businesses such as LCP, BTB, UWB, passive components, and automotive connectivity, and maintain a “buy” rating.
Risk warning: Downstream demand falls short of anticipated risk, and progress in new product development or customer introduction falls short of anticipated risk.