Incident: The company released its 2023 annual report and achieved revenue of 2.12 billion yuan in 2023, +17.3% year over year; net profit to mother of 310 million, +16.4% year over year; net profit after deducting non-return to mother of 280 million yuan, 17.0% year on year. Looking at a single quarter, Q4 achieved revenue of 590 million yuan, +8.2% year-on-month, and +6.3% month-on-month; net profit to mother of 90 million yuan, +3.0% year-on-year, +11.1% month-on-month. The results were generally in line with expectations.
The gross margin of the integrated circuit and analysis business sector is falling under pressure, leading to short-term pressure on the company's gross margin; the ability to control expenses is strong. The company's comprehensive gross margin in 2023 was 45.6%, -1.1 pp; the short-term slight decline in gross margin was mainly due to continuous domestic rectification work in the special industry and medical field in 23 years, which had a certain impact on the testing industry. Among them, the gross margin of the company's integrated circuit and analysis business sector fell 13.8 pp compared to 22.
The company's management expense ratio for the 2023 period was 26.4%, -1.9pp; among them, sales, management, R&D and finance expenses rates were 6.4%, 10.9%, 7.9%, and 1.2%, respectively, +0.1pp, -1.7pp, +0.4pp, and -0.7pp; the company's net interest rate was 17.4%, +0.2pp.
Revenue growth in electronic appliances, aerospace, scientific research and automotive businesses has boosted the company's performance. Based on the strategic guidance of “two-wheel drive and integrated development”, the company targets rapid development in the industrial chain application field, continues to increase test capacity building such as environmental and reliability, integrated circuit verification and analysis, and electromagnetic compatibility, and is further laid out on high-boom tracks such as downstream new energy vehicles, wind power, and power communication 5G. In 2023, revenue from electronic appliances, aerospace, scientific research and automotive businesses increased by 14.7%, 23.9%, 35.8%, and 33.1%, respectively.
Multi-industry layout, increased production capacity for environmental testing services and integrated circuit testing, and sufficient momentum for medium- to long-term growth. The company is an environmental and reliability test verification and comprehensive analysis service solution provider for industrial products. It is committed to the development and production of environmental testing equipment. It can provide customers with comprehensive environmental and reliability test verification and analysis services for the entire industry chain, from chips to components to terminal products. In 2023, the company continued to supplement laboratory special testing requirements, and accelerated the expansion of new energy, energy storage, aerospace, communications, medical devices and other application fields through the construction of special laboratories in Mianyang and Guizhou, Thailand, etc.; Continuously improving the layout of testing services in the new energy and wireless communication industries. Accelerate the construction of the NEV product testing center expansion project and the fifth-generation mobile communication performance testing technology service platform project. It is expected that they will be officially put into operation in the second half of 2024; furthermore, laboratories such as Suzhou, Xi'an, Qingdao, Chengdu, and Shanghai Yite, which expanded production earlier, will enter a period of capacity expansion in 2024-2025, which is expected to contribute to increased performance.
Profit forecasting and investment advice. The company's net profit for 2024-2026 is estimated to be 3.8 billion yuan, 5.0 million yuan, and 630 million yuan respectively. The compound net profit growth rate for the next three years is 26%, maintaining a “buy” rating.
Risk warning: risk of changes in policies and industry standards, risk of rising raw material costs, risk of downstream laboratory capacity improvements falling short of expectations.