2023 results are in line with our expectations
The company announced 2023 results: 2023 operating income of 2.17 billion yuan, +17.3% year on year; net profit to mother of 314 million yuan, +16.4% year on year; deducted non-net profit of 280 million yuan, +17.1% year on year. Looking at the fourth quarter of a year, 4Q23 achieved revenue of 590 million yuan, +8.2% year on year; net profit to mother of 0.94 yuan, +3.0% year on year; deducted non-net profit of 75 million yuan, -2.5% year over year. The performance was in line with our expectations.
FY23 test equipment and environmental testing services grew steadily, and the overall revenue from integrated circuit testing remained flat compared to the same period last year.
FY23's total revenue was RMB 2,117 million, and revenue from environmental testing services, test equipment and integrated circuit verification was RMB 1,03/757 million, respectively, up 19.45%/23.00%/2.34% year-on-year. We judge that 4Q 23:1) Environmental testing services: downstream special industry applications account for relatively high applications, and the revenue pace has slowed down or affected the company's revenue recognition, but the layout of new energy vehicles and other fields has improved significantly. We think the growth rate may be higher than the environmental test average; 2) Test equipment: Sentiment has recovered, the growth rate has increased sequentially, and orders for mechanics, test boxes, and three integrated equipment are improving. Currently, the company's orders are mainly based on third-party testing, gradually entering the industrial field, and profitability is expected to improve further; 3) Integrated circuits: downstream demand has improved, but order recovery is slightly delayed. We judge Staff expansion brought about cost increases and the pace of delivery of new equipment slowed down, and profitability declined year-on-year. We believe revenue is expected to pick up in 24 as demand improves and new production capacity is released.
4Q23 Profitability levels have rebounded, and internal expense control capabilities have been enhanced. The company's gross margin and net margin in '23 were 45.6%/14.8%, respectively. By business, the gross margin for test services was slightly +3.3pct to 58.8% year over year, and the gross margin for test equipment and integrated circuits was -3.0/24.2pct to 32.8%/43.3%, respectively. The profit level declined. The 4Q23 company's gross margin and net margin were 46.9%/15.9%, respectively, -0.3/0.8pct year on year. We judge that it was mainly affected by the increase in test equipment revenue share, but there was a recovery of +1.1/0.7pct from the previous month. The 4Q23 sales/management/R&D/finance expense ratio was 7.1%/8.9%/9.4%/1.2%, compared with -0.1/-3.8/+1.6/-0.1pct, respectively, improving operational efficiency.
Development trends
By expanding the layout of special fields, the company's competitiveness is expected to be further enhanced. Currently, the company has a presence in the fields of satellites, new energy, water, oil and gas, EMC, etc., and has achieved rapid growth in the fields of new energy vehicles, information and communication, while expanding service capabilities in biomantry, commercial aerospace, new materials, and low-altitude economy. We believe that with the expansion of the company's business scope and gradual installation of production capacity, it is expected to form a new growth engine for the company in the medium to long term.
Profit forecasting and valuation
We keep our 2024/25 profit forecast of 400/517 million yuan unchanged. The current stock price corresponding to 2024/2025 P/E is 17.9x/13.9x, respectively. Maintaining an industry rating and a target price of 17.29 yuan, corresponding to the 2024/25 target P/E is 22x/17x, a potential increase of 22.6%.
risks
The new business has not progressed as expected, and operational efficiency has been slow to improve.