Since its establishment, the company has focused on the field of testing equipment, and has now grown into a leading enterprise for flat panel display testing equipment, leading the development of new display testing technology. Based on improving the underlying core technology of electrical signal detection, the company is gradually expanding its business to semiconductor (ATE, PXIe architectures), new energy vehicles and other industries. Since 2023, the company's strategies such as customer expansion, business expansion, and focus on R&D have progressed steadily. We are optimistic about the company's long-term development prospects and maintain the “buy” rating.
Demand for consumer electronics was sluggish, and performance in the first three quarters was under pressure. (1) 23Q1-Q3: The company's revenue was 1,338 billion yuan, -19.84%, net profit of the mother was 191 million yuan, -37.37% year-on-year, net profit after deduction of 174 million yuan, or -38.11% year-on-year. The decline in revenue was due to delays in customer mass production plans and macroeconomic effects, and changes in non-net profit were mainly due to the company's transfer of shares in Suzhou Silicon Vision Technology Co., Ltd. and changes in government subsidies; (2) 23Q3: The company's 23Q3 revenue was 451 million yuan, -19.84% year-on-year, net profit of 603.891 million yuan, and the decline in revenue and profit was mainly affected by factors such as poor consumer electronics demand and delays in customer mass production plans.
Profitability has fluctuated, and gross margin is still impressive. 2023Q1-Q3, the company's gross margin was 56.01%, +0.16pct year-on-year. The company's products are highly competitive, and overall gross margin remains at a high level. The increase in gross margin has benefited from improved cost control and increased export markets. In 2023Q1-Q3, the company's net interest rate was 14.27%, -4.00pcts year-on-year. The company's sales/management/R&D expenses in the first three quarters were 9.71%, 10.73%, and 20.62%, respectively, compared to +0.87 pct, -2.98 pct, and +4.04 pct, respectively. The increase in R&D expenses was due to the fact that R&D expenses remained basically unchanged, but revenue declined, reflecting the company's strategic determination to focus on R&D.
Firmly target and develop large customers. The downstream recovery trend is improving, and we are still waiting for flexibility to be released. (1) Display inspection field: The company exclusively supplies Apple's first-generation MR display testing equipment and is committed to exclusively supplying second-generation MR equipment to develop Meta customers. The deep AI+MR capabilities increase micro-OLED penetration rate, drive micro-OLED inspection demand, and have a lot of room for growth. Meanwhile, according to the company's customer BOE's announcement on November 28, BOE plans to invest 63 billion yuan to build the 8.6th generation AMOLED production line, which we expect will drive demand for AMOLED testing equipment. (2) New energy sector: The company targets Tesla customers in the field of new energy testing, lays out the North American and Mexican markets, and actively lays out ADAS sensor testing. Well-known customers in the domestic market provide PMU process and BMS testing production lines. The growth rate of the NEV industry in the domestic market has slowed marginally, but the consumption recovery process has gradually resumed its growth trend under continuous policy stimulus. The penetration rate of new energy vehicles continues to rise. At the same time, the demand for upstream components has gradually resumed, and the overall demand for new energy testing is strong. (3) Semiconductor field:
The company's non-standard equipment targets Apple customers, and the standard SoC testing machine has achieved further breakthroughs on the client side.
According to the company's announcement on October 12, 2023, the company subscribed to Kaifeng Chuangxin's 14.72% share. The fund focuses on investing in early-stage companies in the integrated circuit field. The company focuses on R&D, independently develops products and technology, and advances in an orderly manner. There is room for localization in the future.
Risk factors: Cyclical fluctuations in the global economy and the risk of trade policies and trade friction; risk of market development in new industries; risk of high customer concentration; risk of disqualification or unsustainability of Apple's qualified suppliers; risk of impairment of goodwill.
Profit forecast, valuation and rating: Combining the data from the three-quarter report of 2023, and the low prosperity of the company's downstream consumer electronics industry and capital expenditure falling short of expectations, we adjusted the company's net profit forecast for 2023/24/25 to 260 million/450 million/6.2 billion yuan (the original forecast was 400 million/51 million/62 million yuan), and the current price corresponding to PE was 56/32/23 times. Precision Electronics and Nagakawa Technology in the panel and semiconductor inspection industry were selected as comparable companies. The current price of comparable companies corresponding to the 2024 average PE valuation is 41 times (Wind's unanimous estimate). Considering that the company's current semiconductor business volume is smaller than that of a comparable company, and that the company's growth logic has been switched to 2024, we gave the company a PE valuation of 40 times in 2024, corresponding to the target price of 41 yuan, to maintain the “buy” rating.