2023 results are in line with market expectations

The company announced its 2023 results: operating income of 281 million yuan, +15.75% year on year; realized net profit of 72 million yuan, -32.72% year on year; realized deducted non-net profit of 64 million yuan, or -37.26% year on year. Looking at a single quarter, 4Q23 achieved operating income of 110 million yuan, +18.08% year over month, and +86.17% month on month; net profit to mother was 0.3 million yuan, -10.38% year on year, and +407.62% month on month. The results are in line with market expectations.

Development trends

The scale of revenue has steadily expanded, and gross margin has remained high. 1) By product, RF transceiver chips and high-speed high-precision ADC/DAC chips have been configured and serialized in various types of related chips, with annual revenue of 0.99 million yuan, or -1.87%; power management chips achieved mature supply in the low-orbit commercial satellite industry, with 23-year revenue of 107 million yuan, +18.02% year-on-year; microsystems and modules have been modeled to achieve revenue of 49 million yuan, or +26.90% year-on-year. 2) The company's gross margin in '23 was 4.54ppt to 82.51% year on year, mainly due to product restructuring and new office buildings. The net profit margin in '23 was 18.60ppt to 25.81% year over year, mainly due to cost side expansion.

High-value R&D strengthens leading edge, and has a broad layout in emerging fields. The company's expense ratio for the 2023 period was +11.27ppt to 48.30% year on year. Among them, the R&D expenditure ratio was +12.33ppt to 45.25% year over year, and the number of R&D personnel increased 39% to 182 people year over year. The company continues to increase the development of products in emerging fields such as low-orbit satellites, digital array radars, and underwater exploration. The new product, CX8845, is the first high-speed high-precision ADC/DAC chip product known in China with a full forward design and the highest comprehensive performance index; 8 standard SIP component products can be reduced to up to 10% of the traditional solution; power management chips have been successfully applied to low-orbit commercial satellite payloads and platforms. We believe that the company continues to strengthen its R&D network in emerging fields, which is expected to strengthen the company's leading edge in the field of high-end analog chips and inject long-term development momentum into the company.

Deeply involved in special RF analog chips, it is expected to benefit from the development of the satellite industry and the improvement in the level of informatization and localization of special equipment. 1) The company is one of the few enterprises in China that can provide special RF analog chip solutions. The products are widely used in information technology equipment such as satellite internet, data links, communication terminals, phased arrays, etc., and announced in July 2023 that it was selected as the fifth batch of specialized and new “Little Giant” enterprises by the Ministry of Industry and Information Technology; 2) The company closely follows low-orbit satellite industry trends, and various power management chips have been applied on the planet. The size and weight of the newly developed SiP product is reduced by 90% compared to traditional solutions. We believe that the improvement in the informatization of special equipment and localization of core devices is expected to help the company grow in the long term; the company closely follows trends in the satellite industry and is expected to share the dividends of the low-orbit satellite constellation industry with technical barriers and first-mover advantages.

Profit forecasting and valuation

We keep the company's net profit forecast for 2024 and 2025 unchanged. The current stock price corresponds to 2024/2025 66.3/41.2x P/E. We maintain our outperforming industry rating and keep our target price of 64.67 yuan unchanged, corresponding to 51.9x P/E in 2025, with a potential increase of 26%.

risks

Macroenvironmental and policy risks; order delivery falls short of expectations.