Core views
The company's revenue growth rate in 2023 is significantly slower than in the past 3 years. It is expected to be mainly due to phased budget delays in downstream communications and other industries since the second quarter of 2023, compounding the effects of dealers' inventory removal. DHO series products have outstanding cost performance advantages, and sales revenue increased sharply by 193.79% year on year, becoming the highlight of performance. Looking ahead to 2024, the company will “improve quality, increase efficiency and return”, accelerate the deployment of Malaysian production capacity to overseas markets, collaborate with NISU Electronics to provide comprehensive solutions, and repurchase shares for equity incentives. Judging from long-term trends, self-development of chips and high-end product iteration are still the source of the company's core competitiveness. The 13GHz oscilloscope needs to be further expanded, and the overall gross margin is expected to continue to increase.
occurrences
The company released its 2023 annual report, achieving revenue of 671 million yuan, +6.34% year over year; net profit to mother of 108 million yuan, +16.72% year over year; net profit after deducting non-return to mother of 599.492 million yuan, +27.60% year over year. Revenue for the fourth quarter of 2023 was 198 million yuan, -8.54% year over year; net profit to mother was 398.91 million yuan, -5.81% year over year; net profit after deducting non-return to mother was 295.407 million yuan, +0.07% year over year.
Brief review
1. Revenue split: The overall revenue growth rate in 2023 is under pressure. DHO oscilloscope growth became a highlight. The company's revenue growth rate in 2023 was significantly slower than in the past 3 years. It is mainly expected to be due to phased budget delays in downstream communications and other industries since the second quarter of 2023, compounding the effects of dealers' inventory removal. Overall demand in the electrical measuring instrument industry is still sluggish and needs to bottom up. The company's new oscilloscope products have been released one after another, hedging the declining growth rate of the industry to a certain extent and recording single-digit growth; judging from the split structure, self-development of chips and high-end iteration of products are still the source of the company's core competitiveness.
1) Product division: ① Continuous optimization of the oscilloscope product structure: In 2023, sales of digital oscilloscope products equipped with the company's self-developed core technology platform accounted for 76.03% of total oscilloscope sales, +5.64 pct; the company's high-end (bandwidth ≥2 GHz) and high-resolution (vertical resolution ≥12 bit) digital oscilloscope accounted for 54.29% of total digital oscilloscope sales, +12.64pct. Among them, sales revenue of DHO series products increased significantly by 193.79% year on year. ② In 2023, the company's RF instrument revenue increased 14.41% year on year, which is higher than the overall business revenue; with the company's Xi'an R&D center put into operation and the Xi'an subsidiary established, the competitiveness of RF instruments is expected to further improve.
2) By region: In 2023, the company's domestic revenue increased 14.64% year on year to 403 million yuan, accounting for 60.99% of the main business revenue; overseas revenue fell 3.54% year on year to 258 million yuan. The company still fully benefits from the domestic substitution policy, and the domestic business growth rate is significantly higher than that of overseas markets. 3) Channel division: The company's distribution revenue increased 10.6% year-on-year to 486 million yuan, and direct sales revenue fell slightly by 0.69% to 176 million yuan, accounting for 26.54%; high-value-added products brought higher technical service requirements, and the direct sales ratio is expected to increase as high-end products are released.
2. Profit analysis: The product structure continues to be optimized, and the comprehensive gross margin increased as scheduled to reach 56.45% of the company's gross margin in 2023, +4.06 pct. The gross margin level continued to improve; among them, domestic and overseas gross margins were 60.24% and 51.12% respectively. Domestic business revenue growth with a better product structure provided a marginal contribution to the increase in comprehensive gross margin. The gross margin of digital oscilloscopes in 2023 was 58.26%, +3.31 pct. High-end and self-developed core technology platform products significantly contributed to the gross margin of digital oscilloscopes. In 2023, the company's sales, management, R&D and financial expense ratios were 15.75%, 9.50%, 21.30%, and -0.30%, respectively, -0.89pct, -0.74pct, +1.38pct, and +1.69pct, respectively.
Currently, the company has four R&D centers in Beijing, Suzhou, Xi'an and Shanghai, and high R&D investment has brought continuous breakthroughs in new products. In 2023, the company's net interest rate increased by 1.43 pct year on year to 16.10%. With the gradual implementation of scale effects and continuous cost-side dilution, there is still plenty of room for improvement in the net interest rate level.
3. The “high-end + cost-effective” product strategy explores the market in depth, and the “improving quality, efficiency and return” new product launch in 2024: the company digs deep into the market and adheres to the “high-end + cost-effective” product strategy. ① 13GHz oscilloscope: In September 2023, the company released the 13GHz bandwidth DS80000 oscilloscope, entering the international high-end market for the first time, greatly expanding the global reach market. ② 12bit high resolution oscilloscope:
In May 2023, the company released the DHO 800/900 series 12 bit resolution cost-effective oscilloscope. It is small in size and can be powered by a mobile power bank, which focuses on differentiated competition. DHO series products are extremely cost-effective, and revenue increased nearly 2 times in 2023.
Improving quality and efficiency and increasing returns: ① Laying out overseas production capacity: The Malaysian production base is expected to be put into use in May 2024, forming an annual production capacity of 80,000 electronic measuring instruments as soon as possible. ② M&A collaboration: Actively promote the integration of enduring electronics after the merger and acquisition, and achieve transformation and upgrading from a hardware-based electronic measuring instrument supplier to a comprehensive solution provider. ③ Focus on shareholder returns: In 2023, the company plans to distribute cash dividends totaling RMB 92.5617 million (tax included), accounting for 85.74% of net profit attributable to mother. In addition, the company plans to use 30-50 million yuan of its own capital to repurchase shares for equity incentives.
Investment advice: We expect the company to achieve revenue of 810, 9.78, and 1,179 million yuan respectively in 2024-2026, and net profit to mother of 1.47, 1.90, and 237 million yuan, respectively, +36.08%, +29.55%, and +24.45%, respectively. Corresponding to the 2024-2026 dynamic PE, 46.29, 35.73, and 28.71 times, respectively, to maintain the “buy” rating.