Matters:
On February 23, 2024, the company issued an announcement of the 2023 annual results report:
1) 2023: Operating income of 1,331 million yuan, a year-on-year decrease of 8.03%; net profit to mother - $535 million, a year-on-year decrease of 490.26%; net profit after deduction - 559 million yuan, a year-on-year decrease of 682.43%;? 2) 2023Q4: Operating income of 327 million yuan, a year-on-year decrease of 19.80% and a year-on-month decrease of 7.99%; net profit to mother - 171 million yuan; net profit after deduction - 179 million yuan.
Commentary:
Short-term performance is under pressure, and demand recovery combined with new product expansion is expected to gradually improve the company's performance. Weak terminal demand in 2023 compounded by customers in the inventory removal stage. The company actively exploited the market. Product sales increased year-on-year but prices were under certain pressure, causing short-term performance to fluctuate. According to the company announcement, the company's revenue in 2023 was -8.03% year-on-year to 1,331 billion yuan, and part of the profit was affected by the increase in R&D expenses and equity incentive expenses. On a quarterly basis, the company achieved revenue of 327 million yuan in 2023Q4, -19.80%/-7.99% year-on-year.
In the future, as terminal demand recovers and the company's new product launch, the company's performance is expected to return to a growth trajectory.
The bottom of the industry cycle has passed+domestic substitution has accelerated, and domestic analog chip manufacturers are expected to usher in a new round of growth.
Referring to the current state of the industry cycle, we believe that the semiconductor industry boom cycle has begun to gradually pick up. In terms of the competitive landscape, at present, the localization rate of high-end markets such as multi-phase power supplies and battery management chips in China is still low. Major overseas manufacturers such as TI and MPS still occupy a major share of the market, and domestic manufacturers are catching up with the layout at an accelerated pace. At present, the company has achieved a full-level product layout for DC-DC chips. It is the first domestic manufacturer to break through multi-phase power supply products, and has carried out in-depth cooperation with the main chip manufacturer Intel, covering well-known companies such as Xiaomi, Dell, and HP. At the same time, the company continues to iteratively upgrade product performance and actively expand new products such as battery management chips and signal chain chips. In the future, the company is expected to usher in a period of rapid growth in the process of demand recovery and domestic substitution.
Virtual IDM builds its own technical barriers and opens up room for growth by increasing the layout of communication computing+automotive electronics.
Through cooperation with SMIC, Huahong Hongli, etc., the company has now successfully built a medium- and low-voltage/high-pressure/ultra-high pressure BCD process platform, and initially built the system's own process system. Relying on the virtual IDM process platform, the company can achieve optimal chip performance and faster product development speed, laying a solid foundation for developing servers, automotive electronics, etc. Cloud computing drives server demand growth and AI PC innovation, driving the expansion of the multiphase power supply market. The company is one of the few domestic manufacturers that can provide high-end power management products such as DrMOS and multi-phase controllers, and is expected to benefit from industry trends as a priority. At the same time, the company has launched a variety of automotive-grade products. In the future, with the continuous advancement of electric & intelligent technology, the company's automotive business is expected to develop rapidly.
Investment advice: Demand for terminals is about to pick up, and domestic substitution continues to advance. As a domestic analog chip manufacturer operating under the virtual IDM model, the company continues to expand its product layout and open up room for long-term growth. Considering that the recovery in downstream demand falls short of expectations, we adjusted the company's 2023-2025 net profit forecast from -3.62/-1.19/099 million yuan to -535/-1.91/40 billion yuan, corresponding EPS to -1.20/-0.43/0.09 yuan, maintaining the “recommended” rating.
Risk warning: downstream demand falls short of expectations; new product development progress falls short of expectations; industry competition intensifies.