occurrences
The company released its 2023 performance report. It is expected to achieve annual revenue of 2,338 billion yuan, a year-on-year decrease of 12.73%; net profit to mother of 296 million yuan, a year-on-year decrease of 501.64%; Q4 revenue of 573 million yuan in a single quarter, a decrease of 0.08 million yuan; and net profit to mother of 162 million yuan, a decrease of 0.06 million yuan over the previous year.
Key points of investment
Affected by weak market demand, the company's short-term performance is under pressure. The semiconductor industry cycle declined in 2023, overall market demand was weak, and the company's operating performance slowed.
1) It is expected to achieve operating income of 2,338 billion yuan for the whole year, a year-on-year decrease of 12.73%; with changes in the revenue structure and increase in the gross margin of the one-stop chip customization service business, the annual comprehensive gross margin is expected to be 44.75%, up 3.16% year on year; net profit to the mother is -296 million yuan, a year-on-year decrease of 501.64%, mainly due to: R&D investment as a share of operating income increased to 40.82% of operating income, an increase of 9.58% year on year; credit impairment losses and asset impairment losses totaled 119 million yuan in 2023;
2) Q4's revenue for a single quarter was 573 million yuan, a decrease of 08 million yuan, net profit to mother of 162 million yuan, a decrease of 06 billion yuan over the previous quarter, and a gross profit margin of 48.85%, an increase of 14.06% over the previous quarter.
We have been deeply involved in GPU IP for many years, and our products are used in a wide range of fields. VeriSilicon GPU IP has been working in the embedded market for nearly 20 years, and has been adopted by customers in many market fields, including data centers, automotive electronics, wearable devices, PCs, etc., and has been widely used in automotive electronics, in vehicle entertainment systems and reconfigurable dashboards; in the wearable field, 2D GPUs can achieve 3D effects, such as smart watches, MCUs that support display functions, etc.; in the PC/server field, the company also has long-term technology accumulation in desktop display rendering; in the data center field, the company's GPUs can and nerves Network processor IP fusion supports graphics rendering, general computing, and AI processing, and provides a general-purpose processor platform with high computing power.
The number of NPU IPs in the AI field continues to increase, with global shipments exceeding 100 million units. The company's NPU IP is a high-performance AI processor IP. It uses a low power consumption, programmable and expandable architecture design, can be flexibly configured to meet the different requirements of customers on chip size and power consumption, and is a cost-effective neural network acceleration engine. As of February 29, 2024, more than 100 million artificial intelligence (AI) chips integrated with VeriSilicon Neural Network Processor (NPU) IP have been shipped worldwide, mainly used in 10 markets including the Internet of Things, wearable devices, smart TVs, smart homes, security monitoring, servers, automotive electronics, smartphones, tablets, and smart healthcare. Over the past seven years, VeriSilicon has led the world in the field of embedded AI/NPU, and its NPU IP has been used by 72 customers in 128 AI chips in these markets.
The scale effect of the mass production business was evident, and profitability gradually improved. By the end of 23Q3, the company achieved chip design revenue of 378 million yuan, a year-on-year decrease of 19.05%; achieved mass production revenue of 858 million yuan, an increase of 14.17% over the previous year. Of the chip design business revenue in the first three quarters, process nodes at 28 nm and below accounted for 85.40% of revenue, and process nodes at 14 nm and below accounted for 55.08% of revenue. By the end of the third quarter, the number of 28nm and below process node projects implemented by the company accounted for 52.00% of the chip design projects, of which the number of 14nm and below process node projects accounted for 25.33%.
Steady growth helps Chiplet project R&D to seize the AIGC trend. With the development of technology in the field of artificial intelligence, various AIGC applications such as ChatGPT are rapidly emerging. The company plans to raise no more than 1,808 billion yuan, mainly for: AIGC and Chiplet Solution Platform R&D projects in the field of smart mobility; next-generation IP R&D and industrialization projects for AIGC, graphics processing and other scenarios. Starting with the Chiplet chip architecture, etc., the company can not only continue to engage in semiconductor IP licensing business, but also upgrade to a Chiplet supplier, fully combining the technical advantages of the company's one-stop chip customization service and semiconductor IP licensing service, improving the company's IP reusability, and effectively reducing the design costs, risks, and R&D iteration cycles of chip customers.
Investment advice:
We expect the company's 2023-2025 net profit to be -3.0/0.1/100 million yuan, maintaining a “buy” rating.
Risk warning:
Technology iteration risks; new product development falls short of expectations; industry competition increases risks; product promotion falls short of expectations; market demand recovery falls short of expectations.