Overcoming insufficient demand in 23 years and improving the company's core competitiveness. In 2023, the company overcame insufficient effective demand, and set-top boxes and network connection equipment received multiple project packages from the three major domestic communication operators, increasing its market share; orders from key overseas strategic customers and emerging markets such as Europe, Australia, and Latin America were also actively increasing. XR R&D, technology and product reserves were upgraded, and vehicle display systems were targeted by many key projects from core customers.

In 2023, the company achieved operating income of 10.627 billion yuan, a year-on-year decrease of 11.50%; realized net profit of 602 million yuan, a year-on-year decrease of 26.85%, and gross margin of 16.75%.

Digital set-top box business: The company's operator won the bid, which exceeded expectations. The company Mobile won the bid for the first place in the 2023 smart set-top box product centralized procurement project, with a cumulative share of 28.39%; in 2023, China Unicom's centralized smart set-top box centralized public procurement project won fourth place. Driven by demand from overseas Europe, Latin America, India, Africa, the Middle East, etc., orders can achieve stable supply delivery as a whole, and the market coverage and market share of mainstream overseas telecommunications or integrated operations are steadily increasing.

Broadband business: Benefiting from the “14th Five-Year Plan” Digital Economic Development Plan and the domestic gigabit broadband network upgrade, the company's PON gateway market share has increased markedly. Domestic market: In March 2023, the company won the bid for Telecom Group's broadband integrated terminal collection project with an 11% share, ranking first in the overall bid share. In April 2023, the company successfully entered the mobile government and enterprise market, winning a bid share of 22.22%. In May 2023, China Unicom launched the first centralized procurement of smart home gateways, and the company successfully won the bid at a higher price.

VR business: The company's products, mainly the Pancake series, are customized projects for major B-side customers in the overseas industry, focusing on expanding sales to customers in Japan, the United States, South Korea, India, Brazil, etc.

Automotive electronic vehicle display assembly business: In 2023, the company's professional display business achieved revenue of 2,407 billion yuan, accounting for 22.65% of the company's revenue, an increase of 12.79% over the previous year. Among them, in the automotive electronic vehicle display assembly business, the company's automotive intelligence completed the production and sale of more than 1 million sets of products, achieving revenue of 982 million yuan, and a year-on-year increase of 216.29% in revenue. In 2023, the company continued to receive 20 key project targets from core customers, added new targets for FAW Pentium, Changan Avita, and Geely Galaxy series products, and simultaneously obtained access and project targets from two leading independent OEMs and mainstream domestic car manufacturers.

Profit forecast, valuation and rating: Due to insufficient demand for consumer electronics, we lowered the 24-25 net profit forecast to the mother to 747/843 million yuan (43.19% and 45.93%, respectively), and the net profit forecast for 26 years was 977 million yuan. The PE corresponding to the current market value is 19X, 16X, and 14X, respectively. Since the company's two traditional businesses, traditional set-top boxes and broadband, provide stable basic markets, the price of automotive displays in the emerging business has risen sharply under the trend of multi-screen+large-screen, maintaining a “buy” rating.

Risk warning: insufficient market demand and upstream supply, policy implementation falls short of expectations, overseas expansion falls short of expectations