Waiting for Android Optics to restart and upgrade, XR business volume is expected to drive it back to rapid growth
Considering that the company's 2024 performance guidance outlook is lower than the market's previous optimistic expectations, based on the assumption that non-operating income falls back to 500 million yuan, we lowered the 2024-2025 net profit forecast from 16.79/21.39 to $1,381,781 billion, and added the 2026 net profit forecast of $2,208 billion, corresponding year-on-year growth rates of 23.5%/31.2%/23.9%, respectively. The current stock price of HK$43.7 corresponds to 31.9/24.3/19.6 times 2024 to 2026 PE, waiting for Android Optics to restart and upgrade, XR volume is expected to drive its rapid growth and maintain its “gain” rating.
The main profit in 2023 fell short of expectations. The analysis was mainly due to the mobile phone module business falling short of expectations
The company's net profit of 1.1 billion yuan in 2023 was in line with the company's previous earnings forecast range, but the 2023H2 operating profit of 150 million was lower than our expectations. The analysis was mainly due to the company's mobile phone module ASP and gross margin being lower than expected, the company's 2023H2 module business product structure weakening month-on-month, and the improvement in the 2023H2 pricing environment will be reflected in 2024. However, 2023H2's mobile phone lenses, car lenses, and other new business performance are basically in line with our previous expectations: (1) The ASP and gross margin ratio of the 2023H2 mobile phone lens are improving on schedule. The analysis mainly benefits from the return of high-end domestic customers and the climb of major overseas customers. (2) Vehicle lens ASP and gross margin remained stable year over year in 2023, and vehicle module revenue of 1.6 billion yuan was realized as scheduled. (3) VR revenue in 2023 was 1.87 billion yuan, down 9% year on year, basically in line with our expectations. The analysis was mainly due to the decline in shipments from major customers.
The improvement in mobile phone optics in 2024 may fall short of the market's optimistic expectations, and the growth rate of the automotive optics business may slow down
(1) The company indicates that mobile phone module shipments in 2024 will remain the same year on year. ASP has increased significantly, and gross margin has increased to 5% or slightly more than 5%. The analysis is mainly due to mobile phone terminal brands that may continue to strongly control BOM costs.
(2) Benefiting from the progress of high-end domestic customers and major overseas customers, the company guided a 5% year-on-year increase in mobile phone lens shipments in 2024, an increase in ASP, and an increase in gross margin of 15% to 20% in 2023. (3) The company indicates a 10% year-on-year increase in vehicle lens shipments. The analysis shows that the overall growth rate of electric smart cars may slow down in 2024. (4) The company directed vehicle module revenue of 2 billion yuan, a year-on-year increase of 25% lower than our expectations. The analysis was due to overall price pressure in the industry and the company's focus on high-end customer projects. (5) The company has guided a 15% year-on-year increase in VR revenue, and is actually expected to exceed expectations. New products from major customers may exceed expectations during the year.
Risk warning: Product launch falls short of expectations, production capacity and supply chain risks, and demand recovery falls short of expectations.