Revenue in 2023 was under pressure in the short term, and increased profitability drove a steady increase in net profit. According to the company's 2023 annual report, the company's revenue in 2023 was 10.21 billion yuan, down 15.0% year on year; net profit to mother was 1.01 billion yuan, up 11.1% year on year. Looking at a single quarter, 4Q23's revenue was 3.0 billion yuan, down 5.1% year on year, and net profit to mother was 200 million yuan, up 6.2% year on year. We judge that in 2023 the company's revenue was under pressure or due to weak demand for small base stations, and the year-on-year increase in net profit was mainly due to an increase in profitability. Considering the impact of pressure on the demand side of the company's small base station business, we expect the company's net profit to be 13.01/16.68/21.12 (previous value: 14.17/18.09/-) billion yuan from 2024 to 2026. According to Wind's unanimous expectations, the average PE value for 2024 is 28x. Considering the advantages of the company's entire industry chain layout, the target price is 38.83 yuan/share (previous value: 34.77 yuan/share), maintaining the “buy” rating.
In 23, the company perceived a high year-on-year increase in business revenue; looking at the optical module business continued to break through segments, the company's intelligent manufacturing business revenue in 2023 was 3.19 billion yuan, down 3.0% year on year; the company's connectivity business revenue was 3.11 billion yuan, down 45.5% year on year, mainly due to the impact of the 5G construction cycle, the scale of the company's network terminal business delivery was reduced. On the other hand, according to the company's annual report, the company delivered a full range of 400G optical modules on a large scale and entered many leading Internet vendors at home and abroad, and 800G products were tested to achieve small-batch delivery; the company's perceived business revenue was 3.25 billion yuan, an increase of 40.0% over the previous year, and sales of new energy and its upstream and downstream industry chains accounted for more than 60%. The company's NEV PTC thermal management system business continued to grow, covering all domestic NEV and joint venture brands; the revenue of laser holographic film series products was 50 billion yuan, down 12.6% year on year.
Rapid increase in gross margin; high investment in R&D
In 2023, the company's consolidated gross margin was 23.1%, up 4.0pct year-on-year. In terms of expenses, the company's sales/management/ R&D expenses rates in 2023 were 5.4%/4.0%/7.3%, respectively, up 0.4/0.5/2.6 pct year-on-year, respectively. Among them, R&D investment remained high. We judge that this is mainly due to the company continuing to increase investment in R&D of new technologies and products. In terms of cash flow, the company's net operating cash inflow in 2023 was 1.48 billion yuan, an increase of 115.2% over the previous year, mainly due to an increase in the net return of working capital.
The perception business consolidates its leading position; the overseas digital communication market continues to advance, and the company is expected to consolidate the leading position in the smart home sensor and NEV PTC heater industry, anchor the new energy and upstream and downstream industry chains, and drive the rapid growth of the company's perceived business revenue. In addition, in the field of optical communication, the company vigorously promotes data center business. According to the company's annual report, the company's 800GLPO silicon optical module won the “Most Competitive Optical Communication Product” award in the 2023 ICC Xunshi Hero List; the company's first 400GZR+ Pro coherent optical module product It has received widespread attention from major customers at home and abroad, and we believe it can become a new growth point for the optical module business; on the other hand, the company has basically achieved autonomous and controllable high-end optical chips, and has full self-development and design capabilities from silicon chips to modules.
Risk warning: Overseas market expansion of optical modules falls short of expectations; the competitive pattern in the optical communications industry deteriorates.