The company's revenue has resumed growth, showing that control products dominate. Revenue in 2022 was 381 million yuan, a year-on-year decrease of -18.65%; net profit to mother was 29 million yuan, a year-on-year decrease of 64.72%. Revenue for the first three quarters of 2023 was 337 million yuan, up 24.56% year on year; net profit to mother was 12 million yuan, down 46.28% year on year. Looking at the 2022 annual report data by product, the revenue of control products was 376 million yuan, with a gross profit margin of 51.69%, accounting for 98.86%, a year-on-year decrease of 19.34%; revenue of other products was 0.04 billion yuan, with a gross profit margin of 45.35%, accounting for 1.14%, an increase of 228.46% year-on-year. By region, domestic sales revenue was 374 million yuan, accounting for 98.08%, a year-on-year decrease of 19.26%; overseas sales revenue was 0.07 billion yuan, accounting for 1.92%, up 32.68% year-on-year.
Video and audio products and solutions are expanding horizontally in the industry and penetrating the market vertically, and it is expected that the product line will be expanded in the future to increase revenue. In terms of horizontal industry expansion, the company's products are widely used in multimedia video scenarios such as command and control centers, conference rooms and commercial applications in various industries in society. In addition to the traditional business mentioned above, the company is working to expand and develop new tracks. Relying on years of technology accumulation, the company has broken through core technologies such as next-generation XR digital interaction and augmented reality, enabling new scenarios such as integrated rendering and perceptual interaction. In terms of vertical market penetration, in 2020, the company publicly issued convertible corporate bonds to raise capital to focus on the development of professional video and audio processing ASIC chips. It can not only better meet the requirements of Party, government, and military users for autonomous and controllable localization, further enhance the market competitiveness of the company's products, but also greatly reduce the company's chip procurement costs. Furthermore, the company expects to continue to increase investment in R&D, further combine its core advantages to expand the company's product line and increase the coverage of the company's sales network, and continuously improve the company's revenue scale and operating quality.
The company recently developed two XR digital products, X-shadow and Pandora, which were exhibited at the 2nd World Metaverse Ecology Expo. The company achieved revenue of 337 million yuan in the first three quarters of 2023, an increase of 24.56% over the previous year. On a quarterly basis, in 2023, the company achieved revenue of 72 million yuan, an increase of 8.23% over the same period in '22; Q2 achieved revenue of 146 million yuan, an increase of 40.5% over the same period in '22 and a month-on-month increase of 102.25% over Q1; and the company achieved revenue of 119 million yuan in Q3, an increase of 18.92% over the same period in '22.
Self-developed chips enhance the company's overall competitiveness, continue to invest heavily in R&D, and strive to further achieve autonomous, controllable and domestic substitution. ① Chip manufacturing has always been a “stuck” field in China. Influenced by factors such as the international situation and exchange rate changes, the company's raw material costs have increased to a certain extent. To this end, the company has set up an experienced R&D team to raise capital to invest heavily in independent chip research and development. ② The company's self-developed chips will expand the revenue scale on the basis of prioritizing self-use. Self-developed chips will further enhance the compatibility of the company's products and improve domestic replacement capabilities. The company's products have rich application scenarios, and rely on 5G, AI, AR/XR and other technologies to be continuously updated. The company has already begun the design and development of the second chip. It also focuses on continuing to cultivate industries related to video and audio processing and display control. It will be released to the public in a timely manner after phased progress is made in the future. ③ The ASIC chip developed by the company was delivered to the Foundry factory in August 2023. At the end of December 2023, the company successfully received the sample and is undergoing related testing.
The company introduced a repurchase plan to help the company develop in the long term. On February 1, 2024, the company issued a share repurchase announcement. The company repurchased the company's shares through centralized bidding transactions. The share repurchase price was no more than RMB 30 yuan/share. The total capital for the repurchase of shares was not less than RMB 20 million and not more than RMB 40 million. The repurchase period was 12 months from the date the 25th meeting of the 3rd board of directors reviewed and approved the share repurchase plan. The source of repurchase funds is the company's own funds. The purpose of this repurchase is to protect the interests of investors and enhance investor confidence. At the same time, to establish a perfect long-term incentive mechanism, fully mobilize the enthusiasm of the company's middle and senior management and core personnel, and help the company's long-term development.
Profit forecast and investment advice: On May 17, 2023, the company released the “2023 Stock Options Incentive Plan”. The first exercise period is 2023, and one of the following two conditions must be met: 1) based on 2022 net profit, the 2023 net profit growth rate is not less than 150%; 2) Based on 2022 operating income, the 2023 revenue growth rate is not less than 50%. The second exercise period is 2024, and one of the following two conditions must be met: 1) based on net profit in 2022, with a net profit growth rate of not less than 200% in 2024; 2) based on 2022 operating income, with an operating income growth rate of not less than 100% in 2024.
The company is a leading provider of professional audio and video control equipment and solutions in the industry, continuously expanding industries and regions guided by customer needs. Faced with the chip being “stuck in the neck”, the company set up a research and development team to raise capital to invest heavily in independent research and development. The self-developed ASIC audio and video processing chip has completed chip design, verification and simulation, and has already been screened. It is expected that in the future, the company will continue to expand its product line and increase sales network coverage, thereby improving the level of performance. In this context, we believe that the company is expected to reach the target value of equity incentives in 24 years. The company's main revenue consists of display control products, and other businesses account for a relatively small share. Combined with the equity incentive target, we expect the revenue growth rate of control products to be 42%, 45%, and 32% in 23-25; the company's revenue growth rate will be 39.94%, 43.16%, and 31.06%, respectively. The company showed that the gross margin of control products continued to increase. It was 55.49%, 58.49%, and 61.49% in 23-25, respectively; the company's overall gross margin was 54.71%, 57.86%, and 60.94%.
We expect the company's revenue for 2023-2025 to be $533/763/10 million yuan, respectively, net profit to mother of 0.42/0.89/126 million yuan, and corresponding EPS of 0.23/0.48/0.68 yuan, respectively. Based on the current industry stage and the company's growth rate and barriers, the company was given 70 times PE in 2024, a target price of 33.67 yuan for 6 months, and a “superior to the market” rating.
Risk warning: Product iteration speed falls short of expectations; market competition intensifies; downstream demand falls short of expectations.