The company released its 2023 annual report. Faced with fluctuations in the industry cycle, the company's performance is also under short-term pressure, but with industry recovery and new applications, the company is expected to return to a growth trajectory and maintain a buying rating.
Key points to support ratings
The company's overall performance in 2023 is under pressure, but 23Q4 is showing signs of recovery. The company achieved revenue of 32.066 billion yuan for the full year of 2023, a year-on-year decrease of 11.45%, realized net profit of 3.287 billion yuan, a year-on-year decrease of 34.41%, and realized deduction of non-net profit of 3.170 billion yuan, a year-on-year decrease of 35.09%. Looking at a single quarter, the company achieved revenue of 11.610 billion yuan in 23Q4, +1.67% /month-on-month +30.15%, realized net profit to mother of 1,443 billion yuan, -17.43% /month-on-month +39.73%, and realized deducted non-net profit of 1,399 billion yuan, or -17.66% month-on-month.
In terms of profitability, the company's gross profit margin in 2023 was 21.34%, a year-on-year decrease of 2.66 pcts, and a year-on-year net profit margin of 10.25%, a year-on-year decrease of 3.59 pcts. Looking at a single quarter, the company achieved a gross profit margin of 23.19% in 2023Q4, -3.83 pcts/month-on-month +0.35pcts, and a net profit margin of 12.43%, and -2.88pcts year-on-year. The above changes are mainly due to:
1) The company's profit base is affected by the downturn in the industry cycle; 2) The company increases investment in R&D and continues to promote research and development of trial products and molds.
The cyclical development of the consumer electronics industry causes short-term performance fluctuations, and recovery+innovation drives future growth. Although the consumer electronics industry was generally sluggish in the short term, the pace of innovation did not stop. On the smartphone side, folding screen phones bucked the trend, and the advent of AI phones also brought new innovative elements to the smartphone industry, driving the smartphone industry to recover moderately from 23Q4. The company has been deeply involved in PCB products used in mobile phones and consumer electronics for many years. As the industry recovers and terminal applications such as AI PCs continue to be introduced, consumer electronics will continue to be an important engine for the company's future development.
Ride the new wave of technological development and actively deploy forward-looking applications such as AI and automobiles. In 2023, the company's automotive and server products achieved product revenue of 539 million yuan, an increase of 71.45% over the previous year. 1) On the automotive side: 23H1, the company successfully completed mass production of radar operation boards. In 23Q4, lidar and radar high-frequency antenna boards began to enter the mass production stage; thanks to the increase in shipments of ADAS Domain Controllers, vehicle radars, and vehicle BMS boards, the company's automotive products grew significantly. 2) Server field: The company continues to improve the HDI capability of thick plates, and the board layer of the main production products has been upgraded to a level of 16 to 20L or above. Overseas, the company has received qualification awards related to AMD products. In addition, the company is also actively developing domestic server-related customers. Currently, certification programs with mainstream domestic server suppliers are being carried out as scheduled.
valuations
Despite the pressure on the company's performance in 23, considering that the PCB industry boom is expected to pick up in 24, the company will continue to promote R&D innovation and gradually explore high-growth markets such as AI and automobiles. We expect the company to achieve revenue of 376.31/428.12/48845 billion yuan in 2024/2025/2026, respectively, and realized net profit of 43.70/48.99/5.437 billion yuan, respectively, corresponding to 2024-2026 PE 12.3/11.0/9.9 times, respectively. Maintain a buy rating.
The main risks faced by ratings
The recovery in downstream demand fell short of expectations, technological innovation fell short of expectations, and competition in the PCB industry intensified.