Revenue grew sequentially in the fourth quarter, with gross margin of around 52% in 2023. According to the company's 2023 annual performance forecast, it is expected to achieve revenue of 1,080 billion yuan to 1,095 billion yuan (YoY -39.44% to -38.60%), net profit loss of 36 million yuan to 30 million yuan, net profit loss after deducting non-return to mother net profit loss of 115 million yuan to 105 million yuan, and net profit to mother excluding share payment expenses of 500,000 yuan to 6 million yuan. Of these, 4Q23 achieved revenue of 2.6-282 million yuan (YoY -15% to -10%, QoQ +33% to +40%), and net profit loss to mother of 52.3 million yuan to 46.3 million yuan. As sales prices of some of the company's products are under pressure, the gross margin of some products has declined, and the company's comprehensive gross margin is expected to be around 52% for the full year of 2023.

It is intended to purchase assets through the issuance of convertible corporate bonds and cash payments. According to the announcement issued by the company on January 22, 2024, 85.2574% of Chuangxin's shares will be purchased through the discovery of convertible corporate bonds and cash payments. The transaction price is 890 million yuan, of which 383 million yuan will be paid for convertible corporate bonds. The transaction price for 100% of Chuangxin Micro's shares was 1,060 million yuan, and revenue and net profit for the first three quarters of 2023 were 998 million yuan and 2.2569 million yuan, respectively. According to the “Performance Commitment and Compensation Agreement”, the performance pledger promised that Chuangxin's total net profit for 2024-2026 will not be less than 220 million yuan, based on net profit attributable to mother excluding the impact of share payment expenses involved in implementing equity incentives.

The acquisition of Chuangxinwei will help broaden the company's technology and product layout and implement the “platform-based chip company” strategy.

Chuangxinwei is mainly engaged in the development and sale of high-precision, low-power battery management and high-efficiency, high-density power management chips. After years of deep cultivation and innovation, it has formed a complete product matrix and application fields, successfully entered the supply chain system of leading enterprises in the downstream industry and reached good cooperative relationships. Currently, the downstream application field is mainly in the consumer sector, and is gradually expanding into industrial and other fields. Through this acquisition, the company can effectively broaden its technology and product layout, accelerate its layout in the field of battery management and power management chips, and expand downstream application areas, including but not limited to BMS, AFE, and electricity meters. It is an important step for the company to implement the “platform chip company” strategy, helping the company accelerate its progress towards a comprehensive analog chip manufacturer and provide more comprehensive chip solutions for downstream customers.

Investment advice: The company's product models and downstream application fields continue to be enriched. Maintaining the “purchase” rating, the gross margin decline due to weak demand for base stations and industries and increased competition. Referring to the performance forecast, we lowered the company's net profit to the mother in 2023-2025 to -0.32/+2.09/+330 million yuan (previous value 0.686/3.04 billion yuan), EPS was -0.24/+1.58/+2.49 yuan. The PE in 2024/2025 corresponding to the stock price on January 31, 2024 was 62, respectively /39x The company's product models and downstream application fields continue to be enriched, and profitability is expected to gradually improve as costs drop, maintaining a “buy” rating.

Risk warning: new product development falls short of expectations; customer verification falls short of expectations; demand falls short of expectations; risk of acquisition failure.