Key points of investment
On January 29, 2024, the company released the “2023 Annual Results Forecast”.
23Q4 performed well in a single quarter. High R&D investment led to annual profit pressure. Looking at a single quarter, 23Q4's revenue continued to recover quarterly, and is expected to achieve revenue of 20.43 to 2,396 billion yuan, a year-on-year increase of 31.10% to 53.75%, and -0.20% to 17.04% month-on-month; net profit of 138-223 million yuan, which turned a loss into a profit year on year, up 82.55% to 194.99%; net profit without return to mother was 1.61 to 179 million yuan, an increase of 645.43% to 728.95% month-on-month.
Overall market demand is slowing down and the supply chain continues to adjust inventory. In addition, the company continues to increase investment in R&D, and corresponding high costs such as depreciation of R&D equipment, amortization of intangible assets, and research and testing expenses, the company's performance in 2023 was under pressure. The company expects to achieve revenue of 70.60 to 7.413 billion yuan in 2023, a year-on-year decrease of 26.25% to 29.76%; net profit to mother of 170 to 255 million yuan, a year-on-year decrease of 91.63% to 94.42%; and net profit after deducting non-return to mother of 3600 to 54 million yuan, a year-on-year decrease of 98.12% to 98.75%.
The global display driver chip market is expected to recover, and designers' inventory removal may be completed or production will resume. Demand for the global display driver chip market is expected to return to the growth track in 2024. According to Sigmaintell data, global display driver chip shipments are expected to increase 4% year on year to 7.63 billion units in 2024. Among them, demand for TV/laptop/smartphone display driver chips is expected to increase 5.3%/8.6%/2.7% year on year respectively in 2024. Furthermore, in the second half of 2022, display driver chip designers began to reduce the number of copies sold and adopt active pricing strategies to absorb inventory. By 23Q3, the inventory removal cycle had basically come to an end. It is expected that by 24Q2, inventory will return to a healthy level. After inventory is cleared, designers may begin to gradually resume production efforts, and the company's operating rate is expected to increase.
40nm OLED driver chips are officially released, deepening cooperation to accelerate the application of silicon-based OLED technology, and Chinese panel companies are actively laying out the OLED market. New OLED production lines built by panel manufacturers such as BOE, Vicino, and Tianma Microelectronics are expected to be fully put into operation within the next few years, driving the growth in demand for OLED panel driver chips. According to Sigmaintell data, demand for OLED smartphones has increased significantly since 23Q4. Demand for OLED DDIC in mainland China is expected to increase by 32.2% year-on-year in 2024, and OLEDDDDDDIC smartphones in mainland China may be in short supply in the second half of 2024. The company is committed to building a complete OLED driver chip process platform; according to the company's January 2024 investor research minutes, the company's 40nm OLED driver chip has been successfully developed and officially released, which is expected to become a new driving force for the company's revenue growth. Furthermore, for AR/VR miniature display technology, the company is actively developing silicon-based OLED technology, and has developed in-depth cooperation with leading domestic panel companies to accelerate application implementation.
Investment advice: In view of the company's high costs such as depreciation and amortization, we have adjusted the company's original performance forecast. It is estimated that revenue from 2023 to 2025 will be adjusted from the original 73.61/100.27/13.410 billion yuan to 73.61/100.27/12.836 billion yuan, with growth rates of -26.8%/36.2%/28.0%, respectively; net profit to mother will be adjusted from the original 3.00/10.91/1,846 billion yuan to 2.11/10.25/1,423 billion yuan, with growth rates of -93.1%/385.9%/38.8%, respectively; the corresponding PE is 133.7/27.5 /19.8 times The company uses display driver chips as the core, and the 55nm production capacity utilization rate remains high. 40nm OLED driver chips have been successfully developed and officially released. As the downstream terminal market gradually recovers, the company is expected to return to the growth track. Continued recommendation, maintaining a “buy” rating.
Risk warning: the risk that demand in the downstream terminal market falls short of expectations, the risk that new technology, new processes, and new products will not be industrialized as scheduled, the risk that market competition will intensify, the risk that production capacity expansion will fall short of expectations, systemic risks, etc.