Incidents:
The company announced the “Report for the Third Quarter of 2023”.
Due to the recovery of the mobile phone market and the company's new product launch, Q3's revenue increased month-on-month. From January to September 2023, the company achieved revenue of 15.081 billion yuan, -1.96% year-on-year; net profit of 368 million yuan, -82.86% year-on-year. Among them, the semiconductor design business achieved revenue of 5.446 billion yuan, accounting for 87.52% of operating income. Looking at a single quarter, 2023Q3 achieved revenue of 6.223 billion yuan, +44.35% year-on-year, +37.58%; net profit of 215 million yuan, -279.41% year-on-year, and -570.70% month-on-month.
High-priced wafers have gradually been eliminated, and the company's profitability has steadily rebounded. From January to September 2023, the company achieved a gross profit margin of 21.28%, year-on-year -11.36pct; net profit margin was 2.39%, year-on-year -11.46pct. Looking at a single quarter, the gross margin of 2023Q3 was 21.78%, -6.65pct year-on-year, +4.47pct; the company's net margin was 3.41%, +6.38pct year-on-year, and +4.46pct month-on-month.
The book value of inventory has declined sharply, and along with the removal of high-priced inventories, the profit level of companies is expected to increase. As of September 30, 2023, the company's inventory book value was $7.552 billion, a decrease of $2,276 billion from June 30. The company's image sensors and touch and display products use advanced and first-out accounting methods. The company's main inventory was formed in 2022, which caused great profit pressure during the inventory removal process, but in the future, along with the gradual elimination of inventory, profitability will continue to improve.
Shipments of high-end image sensors have begun, and the company's market share is expected to increase. The company's OV50H product is the beginning of the company's high-end main camera layout. 50 megapixel has become the mainstream specification in the market. In terms of demand, it spans from low-end models of mobile phones to flagship models, and also spans from main camera to wide angle and telephoto, to triple and fivex optical zoom in terms of application. In order to meet market needs, the company has arranged products with different pixel specifications, which can cover all categories. The OV50H is mainly used for main cameras, while for wide-angle and telephoto applications, it is achieved through 50 megapixel products with small pixels.
The automotive CIS is widely deployed, and the automotive market continues to grow rapidly. With advanced and compact automotive CIS solutions, the company covers a wide range of automotive applications, including ADAS, cab interior monitoring, electronic rearview mirrors, instrument panel cameras, rear view and panoramic images. 2023H1's image sensor business derived revenue from the automotive market was 1,904 billion yuan, an increase of 18.87% over the same period last year.
Profit forecast: We expect the company's net profit for 2023/2024/2025 to be 802/24.78/3.407 billion yuan, respectively, and 162/52/38 times the PE stock price corresponding to November 16, respectively, maintaining the “buy” rating.
Risk warning: New product development falls short of expectations, downstream expansion falls short of expectations, and consumer demand continues to weaken.