Incident: The company announced its 2023 annual results after the market on March 21. In 2023, the company achieved revenue of 924 million yuan, -17.23% year on year, net profit of 47 million yuan, -44.74% year on year, gross profit margin 13.83%, -1.80 pcts year on year, net profit margin of 5.09% year on year, and -2.43 pcts year on year. Our review is below.
Revenue and profit margins declined in 2023, mainly due to terminal sales, new product investment, and exchange rate fluctuations. The year-on-year decline in revenue in 2023 is mainly due to the high iPad shipping base in the 2022 pandemic economy, while iPad terminal shipments continued to be under pressure in 2023, leading to a marked decline in iPad business revenue. At the same time, due to factors such as price cuts in upstream raw materials, the company's camera module product prices declined; the decline in profit margins was mainly affected by product price adjustments, investment in new product development, and exchange rate fluctuations. The company's important new products will enter mass production in 2024, and related employee remuneration and development investment increased significantly in 2023. 23H2 achieved revenue of 557 million yuan, -21.77% year-on-year, +51.77% month-on-month, and net profit of 0.29 million yuan, -45.28% year-on-year, and +61.11% month-on-month. 23H2's revenue improved markedly after entering the peak season, and overall net interest rate also increased.
It is expected that in 2024, new iPhone rear-view photography will be introduced. It is expected that future iterations in rear-view photography innovation and share growth will bring room for several times greater performance growth. As for the current front camera and iPad rear camera business, the share of front photography is the main supplier. There is still room for further growth in 2024. iiPad's share of rear cameras was still low last year, and the share of new iPad rear cameras is expected to increase markedly this year. The iPhone rear-view camera business has the most room for growth. The market size of rear-view modules is several times that of front-camera cameras. At the same time, new iPhone periscope cameras are expected to sink further to Pro models in 2024. Future optical innovation will drive the overall rear-view camera market space to continue to increase.
The company is currently the main supplier of iPhone and iPad front camera modules. It has cooperated with Apple for more than ten years, and has made significant progress in cost control and customer service after being acquired by Lijing. We expect that in 2024, the company will switch to two periscope and ultra-wide-angle modules for rear photography of new iPhones. Continued innovation and iteration in the next two to three years is expected to drive the ASP increase in module ASP, and the increase in its own share will bring a significant increase in the company's performance. In addition, in 2023, the company invested a large amount of upfront costs for new products. In 2024, as new products gradually contribute to revenue, the comprehensive cost ratio will decrease significantly.
Lidar and VR/AR are the driving forces for the next stage of the company's growth. 1) LiDAR: The company and Suteng Juchuang formed a joint venture to engage in lidar module and system assembly business. Shipments of the company's lidar business grew rapidly in 2023, and are expected to increase further in 2024. With the development of advanced autonomous driving, breakthroughs in technology and costs, the lidar business has broad room for growth in the next few years; 2) VR/AR: The company's forward-looking layout VR/AR is the main supplier of Apple Vision Pro camera modules. In addition, the company also established a joint venture with Sudavig to lay out AR optical waveguide technology in the long term. Industrial wave.
Maintain a “Highly Recommended” investment rating. We believe that Gaowei Electronics will have strong performance growth flexibility in the field of Apple's rear-view camera modules in the next 2-3 years, and that the company's forward-looking lidar and VRAR business has long-term room. We forecast 24/25 revenue forecast of US$1,764/2,959 million, net profit to mother of US$0.95/150 million, and current market capitalization corresponding to PE of 20.3/12.7 times. The company is clearly undervalued compared to comparable leaders in Hong Kong stocks and A-shares, and maintains a “highly recommended” investment rating.
Risk warning: Downstream demand falls short of expectations, new business development falls short of expectations, industry competition intensifies, technology iteration risks.