Core views:
Event: The company announced its 2023 three-quarter report. The first three quarters of 2023 achieved operating income of 1,329 billion yuan (YOY -31.57%), net profit of 246 million yuan (YOY -63.15%), and net profit of 244 million yuan (YOY -63.07%) after deducting non-return net profit of 244 million yuan (YOY -63.07%).
Comment: The company's active expansion of various types of component products has shown results. MLCC is widely used in various electronic systems, and the company is expected to benefit from the medium- to long-term prosperity of downstream equipment with its leading position.
On the revenue side, Q3 achieved revenue of 349 million yuan in a single quarter (YOY -36.58%). By product, the company's self-production and agency business revenue in the first three quarters was 760 million yuan/566 million yuan (23.11.02 investor activity record) respectively. Demand from downstream customers for core products, high-reliability porcelain capacitors, slowed in stages, and sales prices declined under low cost procurement; new types of electronic components had a small performance base last year, and revenue increased significantly; and agency business shipments declined. On the profit side, Q3 achieved net profit of 24 million yuan (YOY -87.15%) in a single quarter, and the profit side declined significantly. The main factors are: (1) The overall gross margin for the first three quarters of 23 years fell 10.45pcts to 43.66% year on year. Among them, the gross margin of self-production and agency business was 67.95%/10.74%, respectively (23.11.02 investor activity record). (2) The cost ratio for the period increased 6.40pcts to 17.48% year on year, and the sales/management/R&D/finance expense ratio increased by 2.32/2.67/1.51/-0.09pcts to 5.26%/6.60%/5.41%/0.22%, respectively. The company's operating income decreased, while fixed costs such as labor costs remained flat in the short term, while increasing business-related expenses to consolidate and increase market share. On the balance sheet side, inventory increased by 29.32% to 869 million yuan at the end of 23Q3 compared to the end of '22, or was mainly affected by the slowdown in the pace of shipments.
Profit forecasting and investment suggestions: On the pattern side, the company is positioned in several key areas of upstream components/support. The high-reliability sector pattern is stable, and it is expected that it will be the first to benefit from medium- to long-term prosperity in aerospace and other fields; on the revenue side, with multi-layer porcelain dielectric capacitors as the main line, expanding various categories of products such as filters, etc., and its ability to contribute to performance is gradually improving. The EPS for 23-25 is expected to be 1.77/3.23/4.39 yuan/share, giving the company 22 times PE valuation in 24, corresponding to a reasonable value of 70.98 yuan/share, maintaining a “buy” rating.
Risk warning: low expectations for new product expansion, low expectations for equipment demand and delivery, policy adjustments, etc.