Incident: The company released its 2023 annual report, achieving full year operating income of 21.17 billion yuan, a year-on-year increase of 17.26%; realized net profit of 314 million yuan, an increase of 16.44% over the previous year; and realized net profit of 280 million yuan after deduction from mother, an increase of 17.08% over the previous year. 23Q4 achieved operating income of 590 million yuan, an increase of 8.24% year on year, and realized net profit of 94 million yuan, an increase of 3.03% year on year.
Changes in the revenue structure made the company's profit growth slightly lower than the revenue growth rate: in 2023, the company's test equipment revenue was 753 million yuan, up 23.00% year on year; environmental and reliability testing service revenue was 1.03 billion yuan, up 19.45% year on year; and revenue from integrated circuit verification and analysis services was 257 million yuan, up 2.34% year on year. Since the gross margin level of the test equipment business was relatively lower than that of environmental and reliability testing services, integrated circuit verification and analysis, and achieved a higher revenue growth rate, the company's profit growth rate in 23 was slightly lower than the revenue growth rate.
The overall gross margin decreased slightly, and the cost ratio decreased year on year: in 2023, the gross margin of the test equipment and integrated circuit verification and analysis service business decreased by 1.01 PCT and 13.80 PCT year on year; the gross margin of the environmental reliability testing service business increased by 1.85 PCT year on year. In terms of period expenses, the management fee ratio decreased by 1.65 PCT year on year, mainly due to a decrease in share payment fees; the financial expenses ratio decreased by 0.71 PCT year on year, mainly due to a decrease in interest expenses; and a slight increase in sales and R&D expenses. The comprehensive cost ratio decreased by 1.89PCT year over year.
Accelerate the pace of business development, lay out and plan production capacity in advance: In 23 years, the company continued to increase testing capacity for environmental and reliability, integrated circuit verification and analysis, electromagnetic compatibility, etc., continuously supplementing special laboratory testing requirements, and accelerating the expansion of application fields such as new energy, energy storage, aerospace, communications, medical devices, etc.; through the construction of special laboratories in Mianyang and Guizhou, it has also begun a strategy of going global, preparing a laboratory in Thailand to refine the test service network to enhance the scale effect of the enterprise. Accelerate the construction progress of the NEV product testing center expansion project and the fifth-generation mobile communication performance testing technology service platform project. It is expected to be officially put into operation in the second half of 2024.
Profit forecasting, valuation and ratings: Most of the company's downstream customers are scientific research institutions, military central enterprises, etc., and demand is showing a steady and continuous growth trend. The company's net profit for 2023 was lower than our previous forecast due to slowing demand, etc. Considering the recovery in demand in some downstream sectors, and the initial profit level of some new business layouts, the net profit forecast for 2024-25 was lowered by 20.00% and 24.63% to 3.81 and 455 million yuan, and to forecast net profit to mother of 543 million yuan. EPS for 2024-26 was 0.75, 0.89, and 1.07 yuan respectively, and PE corresponding to the current stock price was 19/16/14X, respectively. In the future, I am still optimistic about the recovery of the company's high-margin business demand and the effective expansion of business in new fields to maintain the company's “buy” rating.
Risk warning: Detect the risk of increased competition in the industry market; management risks due to continuous business expansion; and the risk of changes in industry policies.