Incident: The company released its 2023 annual financial report on February 29, 2024. The company achieved operating income of 5,040 billion yuan in 2023, an increase of 18.93% over the previous year; net profit to mother was 641 million yuan, an increase of 47.98% year on year; it is expected to deduct 592 million yuan in non-net profit, an increase of 60.88% year on year. In 2023, Q4 achieved operating income of 1,364 billion yuan, up 29.09% year on year and 1.50% month on month; realized net profit of 163 million yuan, up 541.12% year on year, down 26.39% month on month; realized deducted non-net profit of 145 million yuan, up 1460.80% year on year, down 32.18% month on month.
Capacity utilization gradually increased, and net profit increased year-on-year in 23: the company's revenue grew steadily in 2023, mainly due to the fact that the new precision electronic components developed by the company in the early stages were widely used in the market. Meanwhile, in 2023, the company's gross margin was 35.35%, +2.35pcts year on year; the company's net profit margin was 14.68%, +2.29pcts year over year. The company's net profit achieved rapid year-on-year growth in 2023, mainly due to the continuous increase in the company's capacity utilization rate, the increase in marginal profit due to the increase in the scale effect, and the increase in gross margin driving the increase in net interest rate.
In terms of expenses, throughout 2023, the company's sales, management, R&D and financial expenses rates were 2.11%/5.59%/7.61%/1.45%, respectively, with year-on-year changes of 0.18/-0.58/0.70/0.25pct, respectively.
Among them, the financial expense ratio and absolute value both showed year-on-year increases in 2023, mainly due to a decrease in exchange earnings.
Market recovery+product innovation, steady communication business development: The company has formed strategic partnerships with many core mobile phone companies at home and abroad. With excellent product quality and stable and reliable supply capacity, the company's share of major core customer purchases is expected to continue to increase. As of December 2023, the company's orders for communication terminals increased significantly year-on-year. Looking at 2023, the order acceptance situation gradually picked up in May. Revenue in the third quarter reached a record high for the company, and the order boom continued until the fourth quarter. Through the promotion of new products and the increase in the supply share of original products, the company's opportunities to participate in cooperative projects are also increasing. Relying on the recovery of market sales from major customers and the continuous addition of new products and materials with the company, the company's orders are growing steadily.
Integrated inductors+LTCC go hand in hand, and the business development trend is improving: Canalys data shows that thanks to the recovery of the consumer market, the global smartphone market grew 8% in the fourth quarter of 2023, ending seven consecutive quarters of year-on-year decline; Canalys predicts that the global smartphone market will expand 4% in 2024. Meanwhile, Canalys expects global NEV sales to increase by 29% throughout 2023, and the global NEV market to grow 27% in 2024. Smartphones and new energy vehicles are the application fields of the company's layout, and the company has a broad market space for products such as integrated inductors and LTCC devices.
In 2023, the company's LTCC series products will be further expanded to leading major customers in the industry, and the field of product application will continue to expand. Currently, the company's LTCC platform products are maintaining a relatively high compound growth rate. As demand for high-end electronic components localization and replacement market applications continues to increase, the sales space for the company's LTCC platform series products is expected to open up further. Furthermore, since 2022, the company's integrated inductors have been supplied in large quantities. In 2023, the market space continued to expand, and the revenue scale expanded rapidly. At present, the company's orders for integrated inductors are growing rapidly, and customer promotion is smooth. Multiple product categories have been promoted to major customers in various application fields and have achieved batch supply, and the supply share continues to increase.
Lowering profit forecasts and maintaining the “gain” rating: The company is mainly engaged in R&D, design, production and sales of new precision electronic component products. The company's new precision electronic component products have been widely used in communications, consumer, automotive electronics, industrial and control automation, data centers, the Internet of Things, new energy and smart homes. At the same time, the company is implementing a strategic layout for emerging industries such as automotive electronics, energy storage, photovoltaics, data centers, the Internet of Things, and modules. Benefiting from the advent of the interconnection of everything, intelligence, and the new energy industry upgrade of the global “carbon peak and carbon neutrality” policy, application scenarios in downstream markets such as automotive electronics, photovoltaics, and energy storage continue to expand. The electronic components industry is expected to develop further. Demand for the company's integrated inductors and LTCC products is expected to continue to increase, and all business indicators are showing a positive trend. Considering that the PV market is still under some pressure, we lowered our profit forecast. We expect the company's net profit to be 826 million yuan, 1,110 billion yuan, and 1.30 billion yuan respectively for 2024-2026, EPS of 1.02, 1.38, 1.65 yuan/share, and PE of 26X, 19X, and 16X respectively.
Risk warning: technology research and development risk; risk of exchange rate fluctuations; new product expansion falling short of expectations; increased risk of industry competition.