Core views:

Incident: Shiyuan Co., Ltd. announced its 2023 performance report. In 2023, the company achieved revenue of 20.06 billion yuan, a year-on-year decrease of 3.94%; net profit to mother of 1,365 billion yuan, a year-on-year decrease of 34.13%; net profit after deducting non-return to mother of 1.15 billion yuan, a year-on-year decrease of 36.23%; and non-recurring profit and loss of 210 million yuan, YoY -19.7%.

The decline in revenue was mainly due to weak recovery in the macro environment, the slowdown in customer demand, and budget and industry price competition affected the education business to a certain extent; the decline in profit was mainly due to rising raw material prices and falling prices of some products, etc., and the comprehensive gross margin fell 1.84% year on year in '23.

Looking at a single quarter, in 23Q4, the company achieved revenue of 4.78 billion yuan, down 3.3% year on year and 32.2% month on month; net profit to mother of 30 billion yuan, down 36.7% year on year, down 33.8% month on month; net profit after deducting 250 million yuan, down 37.0% year on year and 43.8% month on month.

By business, the components business was affected by factors such as the decline in global TV shipments, LCD main control boards and other related business revenue fell 12.37% year on year, and household appliances maintained high growth, YoY +62.48%; the education business was affected by budget and price wars, etc., and revenue fell 8.77% year on year, and Sivo's market share further increased, ranking first; corporate service business revenue increased 2.13% year on year; overseas business fell 1.69% year on year, but it is expected to grow 1.69% year on year, but it is expected to continue growing as its own brands advance and brand customers expand. In terms of new business, revenue from the computing equipment and power electronics business achieved steady growth. In the future, the company will continue to expand its product matrix, and products such as household appliances and educational PCs are expected to release further growth.

Profit forecasting and investment advice. The company's revenue for 23/24 is estimated to be RMB 201.63/21.673 billion, and net profit to mother is RMB 1,36/18.46 billion, respectively. As a leader in the board card field, the company takes the lead in the interactive smart tablet market. With the expansion of the higher vocational education market, the leading position is expected to be further consolidated. Considering 24 years of economic recovery and growth brought about by its own product iteration, the company will be given a “buy” rating of 20 XPE for 24 years, corresponding to a reasonable value of 52.66 yuan/share.

Risk warning. (1) Education informatization fell short of expectations; (2) raw material prices fluctuated; (3) industry penetration rate increased less than expected.