Description of the event
On March 27, the company released its 2023 annual report. During the reporting period, the company achieved operating income of 2.76 billion yuan, an increase of 46.57% over the previous year, and realized net profit of 124 million yuan, an increase of 0.99% over the previous year, and net profit after deducting non-return to mother was 0.29 million yuan. Looking at the fourth quarter of a single quarter, the company achieved operating income of 612 million yuan, an increase of 94.13% over the previous year, achieving net profit of 06 billion yuan and net profit of non-return to mother of -024 million yuan.
Incident comments
The company's Bluetooth audio chip revenue was 1.53 billion yuan, accounting for 71% of the total revenue. Of these, smart Bluetooth audio chip revenue was 1,169 million yuan, an increase of 59% over the previous year, and revenue from smartwatch & bracelet products was 484 million yuan, accounting for 22% of total revenue, up from last year. The company's gross margin in 2023 was 34.2%, down more than 5 percentage points from the previous year. The main reason was that increased R&D expenses and rising upstream costs squeezed the company's gross profit margin. Operating cash flow was good in 2023, partly due to a decrease in raw material procurement.
The company continued to invest in R&D. In 2023, R&D expenses increased by 110 million yuan year-on-year, and the R&D team was expanded. The total number of R&D personnel at the end of 2023 was 592, accounting for 85.8% of all employees. During the reporting period, the company's next-generation 6nm smart wearable chip, BES2800, was successfully filmed, and performance, power consumption and technological innovation were greatly improved. Compared with the previous BES2700 series, the BES2800 chip CPU computing power has increased by 1 times, and the NPU computing power has increased by 4 times. It is expected that mass production will be implemented in 2024. The company achieved mass production of WiFi 6 chips during the reporting period and continued to expand customers in the smart home field. Currently, the company has customers from home appliance manufacturers including Haier, Hisense, Gree, etc.
Looking ahead to 2024, the development of AI applications will generate higher demand for the connectivity, interaction, and processing capabilities of smart terminal devices, and terminal device chips are expected to be upgraded. In addition, we judge that wearable device industry shipments are expected to recover steadily in 2024. According to third-party agency forecasts, global smartwatch shipments are expected to grow by about 17% in 2024, compounded by the decline in the company's upstream wafer foundry costs, and the company's gross margin is expected to improve in 2024.
Thriving in TWS earphones, thriving in AIoT. If the company's achievements in the past were mainly due to seizing the explosive growth opportunities of the TWS headphone industry, the company's future ambition or building an AIoT master control chip platform company in the vast AIoT market.
We believe that in the future, on the one hand, the company will still fully benefit from the increasing penetration rate of TWS headphone brands; on the other hand, the company has outstanding capabilities in various technical fields such as RF, WiFi, Bluetooth, MCU, audio and video processing, and aims to continue to cultivate in the fields of smart wearables and smart home applications. With technology and brand customer resource advantages, the company is expected to build an AIOT main control chip platform company to replicate the success achieved in the TWS headphone industry in the AIOT field. We expect the company's net profit for 2024-2026 to be 2.66, 3.44 billion yuan, and 458 million yuan, respectively. At present, it is recommended to actively seize the bottom allocation opportunities of high-quality IC design companies and maintain the company's “buy” rating.
Risk warning
1. Demand in the AIOT industry is declining;
2. New product development progress falls short of expectations.