Gaowei Electronics announced full-year results for 2023: In 2023, it achieved revenue of US$926 million, YoY -17%, net profit to mother of US$46.59 million, YoY -45%. The performance was lower than our previous expectations. We judge that the tablet business was under significant pressure. Looking at the second half of the year alone, the company's 23H2 achieved revenue of 555 million US dollars, YoY -21%, HoH +50%, net profit to mother of US$28.56 million, YoY -46%, and HoH +58%. In terms of profit margin, gross profit margin of 13.8% in 2023, YOY-1.8pcts, net profit margin 5.0%, Yoy-2.5pcts.
The tablet business has been under pressure throughout the year, and the mobile phone business is still resilient. Focus on the CCM situation in the company's main business:
1) In terms of tablets, according to TechInsights data, the 2023Q1-Q4 Apple iPad global shipments were 1270/1150/13,000/14.3 million units, YoY -20%/-22%/-13%/-21%, and the annual shipment volume for 2023 was 51.6 million units, YoY -19%. As can be seen, iPad's shipment performance from quarter to quarter last year was poor due to the lack of new products, so Gaowei, as the main supplier of iPad camera modules, was also affected. We judge that the tablet business was under pressure in terms of volume and price.
2) In terms of mobile phones, IDC data shows that in 2023, global iPhone shipments reached 235 million units, YoY +3.7%. Although the performance was fair throughout the year, we observed that the iPhone 15 series also launched price reduction promotions in the later stages, which are expected to put some price pressure on suppliers such as Gao Wei, but we believe that the company's share is rising steadily ahead of time, so the mobile phone business is still quite resilient in 2023.
Capital expenditure has been upgraded at an accelerated pace, and the post-production business is growing thin. According to the company's announcement, Capex in 2022 and 2023 were 92.7 million US dollars and 80.8 million US dollars respectively, with a total capital expenditure of 174 million US dollars in the past two years, mainly to purchase additional machinery and equipment to produce more precise flip chip modules. We believe the company is actively expanding production to accept orders for rear camera modules for Apple phones. Looking ahead to the iPhone 16, which will be released in the fall of 2024, and looking forward to the Pro+Pro Max models, we determine that Gaowei is expected to be the first to enter the high-value Periscope telephoto module. In addition, the standard ultra-wide-angle module also has great opportunities, so the 10 billion dollar Apple rear camera market will bring new growth opportunities to Gao Wei.
Emerging businesses continue to advance, and future growth is worth looking forward to. Focusing on emerging businesses, we saw:
1) In terms of MR, as the exclusive supplier of Vision Pro camera modules, although the company's revenue volume is still limited by MR sales in the short term, we believe that along with the cost reduction trend brought about by technological upgrades, second-generation affordable products will have an obvious scaling process. We continue to be optimistic about Apple's leading role in the industrial ecosystem, and Gao Wei as its core supplier may fully benefit.
2) In terms of lidar, the company's announcement shows that Apple's revenue in 2023 was 93%, which means that the lidar business contributed 7% of annual revenue (about 60 million US dollars), which has increased several times compared to 10 million US dollars in 2022. We believe that the company is profoundly benefiting from the accelerated launch of Suteng Juchuang (Sagiteng Juchuang shipped 256,000 units of Lidar in '23, YoY +350%), and the future is expected to grow with Sagitar.
Profit forecast and investment advice: Although the company's performance in 2023 fell short of our expectations, we believe that the company is progressing smoothly with the introduction of higher-value mobile phone rear camera modules, so it raised 2024/2025 revenue to US$17.4/2.75 billion, and anticipated 2026 revenue to US$3.70 billion, up 88%/58%/34% year-on-year respectively, achieving net profit of US$1.0/1.8/270 million, an increase of 115%/78%/50% year-on-year, maintaining the “Highly Recommended” rating.
Risk warning: Share growth falls short of expectations; new business expansion falls short of expectations; industry competition intensifies.