Incident: The company released the “2023 Annual Report” on the evening of March 29. The company achieved operating income of 7.507 billion yuan, up 25.9% year on year; net profit attributable to shareholders of listed companies was 331 million yuan, down 24.3% year on year; net profit attributable to shareholders of listed companies after deducting non-recurring profit and loss was 295 million yuan, down 21.9% year on year.

Controller business revenue continued to grow steadily, rising 26.9% year over year to 7.22 billion yuan. Home appliance controllers achieved revenue of 4.579 billion yuan, a year-on-year increase of 24.7%, and a gross profit margin of 16.8% (+2.2pct). Tool controllers achieved revenue of 811 million yuan, a year-on-year increase of 7.8%, and a gross profit margin of 20.4% (-0.8pct). Intelligent products achieved revenue of 966 million yuan, a year-on-year increase of 31.6%, and a gross profit margin of 23.6% (+1.3pct). Phased array T/R chips achieved revenue of 287 million yuan, a year-on-year increase of 3.44%, and a gross profit margin of 62.30% (-8.95pct).

Automotive electronics are developing rapidly, and technological breakthroughs have been made in domain controllers. In 2023, automotive electronic controllers achieved sales revenue of 552 million yuan, an increase of 82.52% over the previous year. The automotive electronics industry has entered a golden period of development, driving the rapid development of the automotive electronic controller industry. The company has invested in more independent research and development projects. Using technology such as body domain control as an entry point, the company has achieved technological breakthroughs in body area control, door domain control, and central domain control. Some products have already been mass-produced or have basically completed R&D and begun to be delivered. The company first entered the first-class supplier system of well-known overseas automakers in 2023 and formed strategic partnerships with world-renowned car companies. It is expected to further expand the company's influence in the field of automotive electronics in the future.

The gross margin of the controller sector has rebounded, and is expected to increase in the future as the share of phased array T/R chip revenue picks up.

In 2023, the company's comprehensive gross margin was 19.58%, down 0.57 percentage points year-on-year, mainly due to changes in product structure. Among them, the gross margin of the controller business segment increased by 0.22% year on year, mainly through R&D and process optimization, and increased raw material substitution, thereby continuously recovering the gross margin level; the number of products issued by phased array T/R chips awaiting confirmation of revenue increased, and sales volume was lower than production volume.

Expenses have increased in the new development cycle, and the profit side is under phased pressure. In 2023, the company's comprehensive cost ratio (sales+management+R&D+finance) was 13.71%, up 2.58 percentage points from the previous year. It is mainly due to the company's further investment in market development, R&D innovation, etc., mainly to meet future long-term development needs and strategic implementation. Furthermore, the company shortened the useful life of intangible assets and accelerated amortization. The impact amount was about 35 million yuan, and the company's net profit was under phased pressure.

Maintain a “Highly Recommended” investment rating. Heltai is a leading domestic intelligent controller company, and its market share in the field of home appliances and tools continues to increase; the automotive electronics sector has abundant on-hand order reserves, and continuous breakthroughs in domain control technology have already ushered in a scale-up period, outlining the company's second growth curve. The company's net profit for 2024-2026 is estimated to be 531 million yuan/679 million yuan/880 million yuan, respectively, with corresponding growth rates of 60%/28%/30%, and corresponding PE of 20.4X/16.0X/12.3X, respectively, maintaining a “highly recommended” investment rating.

Risk warning: Demand for controllers falls short of expectations, subsidiary performance falls short of expectations, and raw material prices are rising.