2023 results fell slightly short of our expectations
The company announced 2023 results: revenue in 2023 increased 16% year on year to 5,076 billion yuan, and net profit to mother increased 4% year over year to 600 million yuan, lower than our forecast of 6%, mainly due to poor demand in the mobile phone market. Looking back at 2023, we believe that the company's performance in 2023 is still relatively steady, mainly due to:
1) New microprism products from major North American customers were successfully introduced in 2023, and at the same time, superimposed strong customer demand, driving the microprism project to provide the company with new revenue and performance increases; 2) The thin film optical panel business continued to introduce new products from major North American customers, achieving 17.8% year-on-year revenue growth throughout the year. At the same time, gross margin increased 3.4 percentage points to 25.5% year on year; 3) The automotive HUD business actively expanded its global layout. Looking ahead to 2024, we believe that the company's position in the filter business is relatively stable and is expected to benefit from potential innovation upgrades from major Android customers. At the same time, we are optimistic that the company will continue to cooperate with major North American customers to continuously promote the penetration of periscope micro-innovation into more new models.
Development trends
The new Periscope product was successfully introduced, and its position in the filter industry is stable. Pro Max products released by major North American customers in 2023 introduced 5x periscope telephoto. We believe that periscope lenses can provide a good zoom range and speed. According to the 2023 annual report, the gross margin of the company's optical components business reached 30.7%, an increase of 4.5 percentage points over the previous year. Against the backdrop of relatively stable demand in the traditional filter business, the side shows that Crystal has cooperated in an orderly manner with major North American customers to mass produce periscope microprisms, and the gross margin level is relatively excellent. Looking ahead to 2024, we suggest investors pay more attention to the rate of penetration of permissive innovation from major North American customers into more potential models in the future. We believe that Crystal is expected to continue to cooperate with major customers to develop periscope projects; at the same time, in the Android field, Crystal has a deep accumulation of technologies such as absorption and reflection composite filters, coating filters, and spin coating filters. We believe that with the potential innovation of major Android customers, Crystal is expected to cooperate deeply. The filter business may bring new revenue and performance increases.
Automobile HUD is increasing its global layout, and the second growth curve is worth looking forward to. According to the company's annual report, Crystal has successfully obtained Jaguar Land Rover's HUD project; at the same time, the company has joined many new OEMs such as Geely, Dongfeng Rantu, and Changan Mazda. We believe that the global layout is expected to further grow the company's automotive business, and we recommend that investors pay close attention to the pace of expansion of the company's automotive electronics business.
Profit forecasting and valuation
Current stock prices correspond to price-earnings ratios of 28.1 times in 2024 and 25.4 times in 2025. We basically maintained the company's profit forecast for 2024 at $768 million, while introducing a profit forecast for 2025 at $852 million. We maintain our outperforming industry ratings. We believe that filter innovation will boost the company's valuation level. We raised our target price by 20% to 18.0 yuan, which corresponds to 32.6 times the 2024 price-earnings ratio and 29.4 times the 2025 price-earnings ratio. There is 15.8% upside compared to the current stock price.
risks
The development of the automotive electronics business fell short of expectations, and the upgrading of mobile phone camera specifications fell short of expectations.