Net profit returned to mother more than doubled month-on-month in the fourth quarter. According to the company's 2023 performance forecast, it is expected to achieve net profit attributable to mother of 262-332 million yuan (YoY -62% to -70%) and net profit not attributable to mother of 186-255 million yuan (YoY -69.82% to -78.08%) in 2023. 4Q23 achieved net profit of 1.20-190 million yuan (YoY -2% to +55%, QoQ +129% to +262%), after deducting non-return net profit of 0.92 to 162 million yuan (YoY -21% to +40%, QoQ +106% to +263%).
The global analog chip market is expected to resume growth in 2024, and the company's downstream distribution is balanced. The company focuses on analog chip products. According to WSTS data, the global analog chip market size was US$89 billion in 2022, and the CAGR was 6.52% in 2003-2022. It is expected to decrease 8.9% to US$81.1 billion in 2023, and will resume growth of 3.7% to US$84.1 billion in 2024. As of mid-2023, the company has more than 4,600 marketable models in 30 categories. In terms of application areas, the company's downstream distribution is balanced, with consumer electronics and pan-industrial revenue each accounting for about 50%. Among them, consumer electronics demand has gradually recovered in 2023, and it will take time for pan-industrial demand to recover.
A pan-simulation platform has taken shape, from being promoted by domestic substitution to a new round of growth. The company has formed a general simulation platform from the perspectives of product numbers (more than 4,600 models, and the number of new products added each year from 2,300 models to more than 500 models, with more than 300 new models added in the first half of 2023), application areas (scattered), and number of customers (5,000 companies). As of mid-2023, the company had 909 R&D personnel and 311 people with ten years or more of experience in integrated circuits, accounting for 34%. The new products developed are gradually showing a trend of multifunctionality, high-end, and complexity. We believe that in the past, driven by domestic substitution, the company has achieved rapid growth in all aspects. In the future, as early R&D investment gradually enters a monetization period, it is expected to start a new round of growth.
Investment advice: Analog chip platform companies maintain a “buy” rating based on the company's 2023 performance forecast. We slightly raised the company's 2023-2025 net profit to 2.95/4.75/760 million yuan (previous value: 214/4.63/757 million yuan), EPS to 0.63/1.02/1.63 yuan, and PE corresponding to the stock price on January 30, 2024 to 96/60/37x, respectively.
Although short-term profits are under pressure due to R&D investment, we are optimistic about the company's long-term growth capacity as an analog chip platform company and maintain a “buy” rating.
Risk warning: The risk of product development falling short of expectations, customer introduction falling short of expectations, and increased competition.