The 2023 performance is growing steadily. We are optimistic about the company's high-end filters and module volume. Maintaining the “buy” rating. On February 27, 2024, the company released the 2023 performance report. In 2023, the company achieved revenue of 4.378 billion yuan, +19.06% year over year; net profit to mother was 1,165 billion yuan, +8.92% year over year; net profit after deducting non-return to mother was 1,142 billion yuan, +7.14% year over year. In a single quarter, 2023Q4 achieved revenue of 1,305 million yuan, +97.37% year over month; net profit to mother of 346 million yuan, +310.40% year on year, -23.56% month on month; net profit after deducting non-return to mother of 327 million yuan, +309.51% year on year and -26.90% month on month. According to the company's performance report guidelines and judging the competitive nature of the industry, we lowered our profit forecast. The net profit for 2023-2025 is estimated to be 11.65/15.53/2.003 billion yuan (previous value was 13.19/16.69/2.76 billion yuan), corresponding EPS was 2.18/2.91/3.75 yuan (previous value was 2.47/3.13/4.08 yuan), and the PE corresponding to the current stock price is 45.9/34.4/26.7 times. Consumer electronics expectations are compounded by the company's expansion of high-end modules. We are optimistic about the company's long-term growth and maintain a “buy” rating.
The recovery in global smartphone demand was compounded by the strong return of domestic Huawei. Increased demand for domestic RF front-ends combined with the recovery in global mobile phone consumption compounded the increase in 5G penetration rate, driving the increase in mobile RF front-end demand.
TechInsights predicts that global mobile phone sales are expected to pick up to 1,211 billion units in 2024, with 5G sales accounting for a further increase to 72%, driving demand for mobile RF front-ends to bottom up. Looking at the domestic market, Huawei is leading the trend of domestic high-end mobile phones, and the establishment of the Hongmeng ecosystem will further feed back mobile phones. According to statistics from IDC and China Enterprise Research, sales of Huawei phones reached 36.51 million units in 2023, +19.62% compared with the same period, while the higher share of domestic components (47%) of the Huawei Mate60 Pro is expected to drive new demand for domestic RF front-ends.
R&D investment continues to be increased, high-end modules are integrated, and the product matrix is increasingly rich. The company attaches importance to R&D. The 2023Q1-Q3 has invested 410 million yuan in R&D, 46.76% over the same period, and the R&D cost rate reached 13.35%. As of 2023H1, in terms of RF filters, the proportion of integrated and self-produced filters in products such as DiFem, L-diFEM, and GPS modules delivered by the company continued to increase, and the volume on the client side gradually increased.
In terms of RF power amplifiers, the company continues to increase the penetration and coverage of the main transceiver module L-pamiF products used in the 5G NR band. At the same time, it also launched MMMB PA module products, and is already in the customer sample delivery promotion stage. L-PAMID, the most integrated “pearl” product, is accelerating research and development.
Risk warning: downstream demand falls short of expectations; technology development falls short of expectations; customer acquisition falls short of expectations.