The company released its 2023 performance forecast. Profit elasticity in the 23Q4 single quarter was remarkable. I am optimistic that the company will be deeply involved in flash memory control chips, gradually open up new markets in 24 years, and maintain a “buy” rating.
Key points to support ratings
The company's profit improved significantly in 23Q4 compared to the previous month. The company expects to achieve net profit of 0.24-029 million yuan in 2023, a year-on-year decrease of 56.84%-64.28%. It is estimated that non-net profit will be deducted from 0.13-0.18 billion yuan, an increase of 13.20% to 56.74% year-on-year. Looking at a single quarter, if calculated using the median forecast value, the company achieved net profit of 138 million yuan in 23Q4, a sharp increase over the previous year/reversal of losses from month to month. It is expected to deduct non-net profit of 134 million yuan, reversing losses from month to month. The above changes are mainly due to: 1) the company actively responded to various investments in the industry cycle, continued to develop industry customers and overseas channels, and related management expenses, sales expenses, etc. increased dramatically over the same period last year; 2) the company continued to promote the development of high-end solid-state drives and embedded memory firmware solutions and main control chips; 3) 23Q4 benefited from the upward trend in the industry and the rise in storage product prices in a single quarter.
Focus on flash memory main control chips, actively explore new fields, and open up space for subsequent growth. The company previously announced the sale of the touch business, further focusing on its main business. The company is deeply involved in flash memory control chips to form a complete management solution and core technology platform for original storage wafers such as Hynix and Samsung. The construction of the core technology platform will help the company use advanced manufacturing processes to update and iterate the main control chip. At the same time, the company is actively exploring the fields of PC OEMs, servers, data centers, etc., and 23Q4 has completed the formation of an enterprise-level SSD core team. The eMMC product line has a complete layout of vehicle regulations, engineering regulations, high durability and commercial regulations, and has achieved small-batch delivery, and the UFS 3.1 product line already has mass production capacity.
24-year storage entered an upward range, and the price increase continued throughout the year. 2024 NAND according to Chibang Consulting's predictions
Flash is expected to continue to rise in price throughout the year. Among them, 24Q1 is expected to increase the contract price by 18%-23% in the context of original production cuts and inventory recovery. 24Q3 is expected to enter the traditional peak season, or benefit from the North American cloud service industry's replenishment momentum and consumer electronics terminal pickup. The increase is likely to reach 8%-13%. In terms of spot prices, the spot price of 512Gb TLC pellets has reached 3.3 US dollars, up 130.77% in six months. The company holds a large amount of low-cost inventory or will continue to benefit from the price increase of raw materials downstream.
valuations
Considering that the boom in the storage industry has entered an upward range in 24 years, the company continues to promote the development of main control chips and the construction of R&D centers, and gradually explore new markets. We expect the company to achieve revenue of 14.77/22.27/2.80 billion yuan in 2023/2024/2025, respectively, and realized net profit of 0.26/1.50 billion yuan, respectively, or 332.1/56.8/43.3 times PE for 2023-2025, respectively. Maintain a “buy” rating.
The main risks faced by ratings
The risk of memory chip price fluctuations, the risk of falling inventory prices, and the risk of macroeconomic downturn.