Brief performance review
On March 21, 2024, the company announced its 2023 results. The company's revenue for 2023 was HK$10.8 billion, up 0.4%; net profit attributable to mother was HK$480 million, a decrease of 18%; H2 revenue for 2023 was HK$5.6 billion, a decrease of 6%, and net profit to mother was HK$270 million, a decrease of 18%.
Management analysis
Looking downstream, the revenue of automotive and industrial displays in 2023 was HK$9.7 billion, or 1% and -8% compared to the same period, accounting for 90% and 10%; by region, China's revenue was HK$7.9 billion, accounting for 73%, an increase of 5%, and the domestic growth rate was faster than overseas.
Automotive business: The leading display position is stable, and future transformation tier 1 can be expected. The market for automotive display devices is at the 10 billion level. According to Omdia, global automotive display shipments are expected to reach 4% CAGR in the next three years. In 2023, the company ranked first in the world in terms of shipment volume, shipping area, and medium to large size shipments. The market for in-vehicle display systems is estimated to be close to HK$100 billion in 2026, and the global smart cockpit and smart mobility market will reach hundreds of billions of Hong Kong dollars. In terms of smart cockpits, the company has completed a cockpit domain controller based on the high computing power of the Xinchi platform, using a hardware isolation scheme to achieve multi-screen and dual-operating system products in one machine. As a leader in automotive display devices, the company is expected to gradually transform into a system integrator with screen factory resources in the future. The panel industry is the link with the highest technical and financial barriers in the display industry chain. We are optimistic that screen factories will gradually expand downstream and seize the 100 billion system assembly market.
Profit Forecasts, Valuations, and Ratings
In view of increased competition in the industry, we lowered our 2024/2025 net profit forecast to HK$54/62 million (previously HK$83/1.03 billion). We expect the company's net profit to be HK$730 million in 2026. The current price of the company's stock is 8/7/6 times the PE valuation, maintaining a “buy” rating.
Risk warning
The demand for automobiles and the intelligent process fell short of expectations.