Revenue increased 15.6% in 2023, and net profit to mother in 4Q23 hit a quarterly high. According to the company's 2023 performance report, in 2023, it achieved revenue of 887 million yuan (YoY +15.60%), net profit to mother of 200 million yuan (YoY +36.87%), and net profit of non-return to mother of 178 million yuan (YoY +37.92%). Among them, 4Q23 achieved revenue of 252 million yuan (YoY +65%, QoQ -3.7%), and net profit attributable to mother and net profit without return to mother both turned a year-on-year loss into profit, amounting to 81 million yuan and 70 million yuan, respectively, an increase of 62% and 51% over the previous year. Both revenue and profit increased in 2023, mainly due to the structural recovery of the international and domestic consumer electronics markets, and the demand for the company's products from major customers further increased. At the same time, the company continued to expand its R&D team around market and customer needs, and actively promoted the development and upgrading of new product lines. The introduction of new products to clients was good.

Global smartphone shipments increased year-on-year in 4Q23, and AI phones are expected to account for nearly 15% in 2024. According to IDC data, global smartphone shipments in 2023 were 1.17 billion units, down 3.2% year on year, of which 326 million units were shipped in 4Q23, up 8.5% year on year; in 2023, China shipped 271 million units, down 5.0% year on year, of which 73.63 million units were shipped in 4Q23, up 1.2% year on year, ending 10 consecutive quarters of decline. Looking ahead to 2024, AI phones will be the highlight. Brands such as Xiaomi and Samsung have successively launched AI phones. IDC expects global smartphone shipments to increase 2.8% year-on-year to 1.2 billion units in 2024, of which 170 million are AI phones, accounting for nearly 15%. The company provides analog chips for mainstream Android phone brands and is expected to continue to benefit from the industry recovery driven by AI phones in 2024.

There is plenty of room for overseas electronic detonators to be replaced, and the holding subsidiary is officially listed on the New Third Board. According to data from the China Blasting Industry Association, China's electronic detonator production increased from 58 million in 2019 to 670 million in 2023, and the replacement rate increased from 5.29% to 92.54%, and the replacement has basically been completed. However, overseas electronic detonators are being promoted slowly and the penetration rate is low. In most scenarios, electronic detonators have not been replaced, and the market space is large. The company's intelligent network delay management unit is the core component of electronic detonators and is expected to benefit from the full promotion of electronic detonators. The holding subsidiary SEMI Kentuo, which carries out this business, was officially listed on the New Third Board on January 22, 2024.

Investment advice: The recovery in consumer electronics demand is compounded by the introduction of new products, maintaining the “buy” rating as a reference performance report. We adjusted the company's net profit to the mother in 2023 from the previous forecast value of 205 million yuan to 200 million yuan, and the 2024-2025 net profit forecast value remained unchanged at 2.82/339 million yuan. The PE corresponding to the stock price on February 23, 2024 is 31/22/18x, respectively. The company benefited from the recovery in consumer electronics demand and the smooth introduction of new products, maintaining a “buy” rating.

Risk warning: New product development falls short of expectations; customer verification falls short of expectations; demand falls short of expectations.