Brief performance review
On March 20, 2024, the company announced its 2023 results. The company's revenue in 2023 was 31.7 billion yuan, down 5%; net profit due to mother was 1.1 billion yuan, down 54%; H2 revenue in 2023 was 17.5 billion yuan, up 7%; net profit to mother was 660 million yuan, down 49%.
The decline in net profit is mainly due to weak demand for mobile phones and downsizing regulations.
Management analysis
Looking downstream, revenue from mobile phones, automobiles, and ARVR related products in 2023 was 209, 53, and 1.9 billion yuan, -10%, 29%, and -9% compared to the same period, accounting for 66%, 17%, and 6%; by product, the revenue share of optical components and optoelectronic products in 2023 was 30% and 68%, with gross margins of 28% and 6%, all falling by 5 pcts, with profit margins of 11%, 2%, and a decrease of 7 pcts and 2 pcts.
Mobile phone business: In 2023, the number of mobile phone lenses and cameras shipped was 1.2 to 570 million units, or -2% and 10%. Although smartphone demand was weak and still in the downsizing phase, the mobile phone business gradually improved. From January to February 2024, mobile phone lenses and cameras also increased by 41% and 61%, and smartphone production in China also increased by 31%.
Automotive business: 1) Optical parts: The company's automotive lens shipments increased 15% to 91 million units in 2023, leading the global market share, completing the research and development of 17 megapixel “2-in-1” automotive front-view lenses and the development of 8 million glass-plastic hybrid cabin surveillance lenses. In terms of lidar, 3 new mass production projects have been added, mass production of mega-pixel headlights has been achieved in smart car lights, and DMD dynamic projection light modules have been supplied in small batches. From January to February 2024, automotive lenses also increased by 16%, global car sales also declined by 3%, and intelligence continued to advance. 2) In-vehicle cameras and others: The growth rate of the company's automobile revenue is significantly higher than the growth rate of lens shipments, which shows that cameras and other businesses are progressing smoothly. The company successfully obtained a target for a major global project for 8 megapixel automotive modules from the world's top automaker, further consolidating the 8 megapixel module's leading market share position in the world.
Profit Forecasts, Valuations, and Ratings
Considering the intensification of competition in the industry and the rapid decline in the company's profitability, we lowered the company's net profit forecast for 2024/2025 to 15.19 billion yuan (originally 38/4.8 billion yuan). We expect the company's net profit to be 2.4 billion yuan in 2026. The current price of the company's stock is 31/24/19 times the PE valuation, downgraded to an “overweight” rating.
Risk warning
Mobile camera upgrades are slow, demand for automotive lenses falls short of expectations, and competition in the industry is intensifying.