Results for the second half of the year exceeded expectations, with strong guidance for 2024. With 2023H2, the company's revenue was 11.2 billion yuan, which was basically the same year on year, with a year-on-month increase of 21.5%. Among them, revenue from acoustics/optics/electromagnetic transmission and precision structural components/ sensors and semiconductors was 4.2 billion/ 1.9 billion/ 4.6billion/500 million respectively, accounting for 37%/17%/41%/5%, year-on-year growth rate -11.5%/+36.0%/+6.5%/-31.7%. The company recorded a gross margin of 19.2% in the second half of the year, up 1.5pct/5.2pct year over year, mainly due to 1) significant improvement in gross margin due to structural upgrades and price rationalization of optical products; 2) upgrading of acoustic products; 3) improvements in sensor and semiconductor product structure. Looking ahead to 2024, the company expects revenue growth, including PSS, to reach 20%-30% and gross profit margin of more than 20%. We believe that the inflection point of the company's performance has passed, and we are optimistic about continued improvement in the next few years.
Optical profit levels are expected to improve significantly. 2023H2 optical revenue was 1.9 billion, up 36%/5% year over year, mainly benefiting from 1) continuous improvement in product portfolio, 2) slowing industry competition and price rationalization. The gross loss ratio for the second half of the year narrowed from 30%/17% in 2022H2/2023H1 to 9.2%.
In 2023, the company's 5P and above lens shipments increased 48% year-on-year, accounting for 70%, of which 6P lens shipments accounted for 14%, an increase of 5 pcts year-on-year. We expect that in 2023, the company will still benefit from continuous improvements in the product structure, the share of 6p shipments is expected to increase to 20%, and the company's optical losses are expected to narrow further. According to the company's guidelines, the optical business is expected to turn a loss into a profit in the second half of 2024.
Mobile phone acoustics are upgraded and upgraded, and in-vehicle acoustics are being developed collaboratively inside and outside. 2023H2, the company's acoustic business revenue was 4.18 billion, down 11.5% year on year and up 25.7% month on month. The gross margin was 30.7%, up 1.8 pct/month-on-month, and increased by 1.8 pct/m. It mainly benefited from mainstream customer upgrades and an overall ASP increase of about 10% month-on-month in the second half of the year. On February 9, the company announced that the first batch of PSS acquisitions had been completed, and PSS has now become a subsidiary of the company holding 80% of the shares. In the future, PSS will mainly focus on speaker products, and AAC's existing business team will focus more on power amplifiers and acoustic system solutions. We are optimistic about the collaborative development of internal and external automotive acoustics. The company expects PSS to contribute around 200 million to the company's net profit in 2024.
I am optimistic that new structural parts will bring about growth. In 2023, the company's precision structural parts business increased by more than 30% year-on-year. Among them, metal frame revenue increased 34% year over year, and both achieved double-digit growth in shipments and ASP, and maintained leading market share among high-end and flagship models of major customers. Mass production and shipment of the new business spindles began in 2023, with annual shipments of nearly 700,000 units. Furthermore, the company's cooling revenue increased 100% year over year, and it is expected that it will still achieve double-digit growth in 2024.
Investment advice: Reiterate the “buy” rating. Considering PSS and statements, we expect the company's revenue in 2024-2026 to be 262/291/32.2 billion yuan, respectively, up 28%/11%/11% year on year; net profit to mother will be 14/20/25 billion yuan, respectively, with a year-on-year growth rate of 92%/40%/26%. We raised the company's target price to HK$30 (based on the closing exchange rate on March 29), with a target market value of HK$36.5 billion, corresponding to 17x 2025e P/E, maintaining a “buy” rating.
Risk warning: the risk of improving the structure of optical products falling short of expectations, the risk that the recovery of the mobile phone market falls short of expectations, and the risk that the progress of new product development or mass production falls short of expectations.