Incident: On April 7, Star Semiconductor released its 2023 annual report. For the full year of 2023, the company achieved revenue of 3.663 billion yuan, an increase of 35.39% over the previous year, and realized net profit of 911 million yuan, an increase of 11.36% over the previous year.
Q4 Revenue continued to increase month-on-month, and gross margin improved markedly. 1) Q4 achieved revenue of 1,044 billion yuan, a year-on-year increase of 25.62% and a month-on-month increase of 12.2%. Despite pressure on the industry, the company continued to expand its market share, and revenue still achieved steady month-on-month growth. 2) The gross profit margin was 40.47%, an increase of 4.14pct over the previous month. We believe this is due to the decline in upstream costs and the continuous optimization of the company's product structure. 3) R&D expenses were 105 million yuan, and the R&D cost rate reached 10.1%. In terms of personnel, the company maintained a high R&D investment during the low period of the industry. In terms of personnel, by the end of 2023, the total number of employees in the company reached 2002, an increase of 589 over 2022. Of these, the number of R&D technicians increased by 126 over the same period last year. 4) Net profit attributable to mother was 255 million yuan, up 10.92% year on year and 10.53% month on month. In addition to revenue and gross margin factors, the company's Q4 was also affected by non-recurring revenue such as approximately 19.6 million yuan in other revenue.
It is equipped with more than 2 million new energy vehicles, opening up room for growth by entering overseas markets. In 2023, the company's new energy business achieved revenue of 2.56 billion yuan, accounting for 58.86% of total revenue. In terms of new energy vehicles, as the main supplier of domestic automotive-grade IGBT/SiC products, the company has a total of more than 2 million sets of IGBT modules for main drives. In particular, it has made significant progress in developing overseas markets. It has already begun mass delivery to European first-tier brands, and has also added a number of IGBT and SiC MOSFET main motor controller projects.
In terms of wind and solar storage business, in 2023, the company installed IGBT modules based on seventh-generation micro-groove Trench Field Stop technology in batches in ground-based photovoltaic power plants and large-scale energy storage plants, and were installed in batches in North America and other overseas power plants; the company's 1200V 650V high-current single tubes have been used in large quantities in industrial and commercial photovoltaics and energy storage, and are in a leading position in the industry.
Product innovation continues, and automotive-grade SiC modules are ready to go. The company continues to step up R&D efforts, and R&D expenditure increased by 52.16% year on year in 2023. In order to obtain R&D advantages in IGBT/SiC chips and advanced packaging technology, a new R&D center was set up in Zurich, Switzerland. The company also plans to develop high-voltage IGBT products, using the company's sixth-generation Fieldstop Trench chip platform and high-power module production platform to launch 3300V-6500V high-voltage IGBT products used in rail transit and power transmission and transformation industries. At the same time, the company is actively expanding production capacity and established Chongqing Anda Semiconductor Co., Ltd. as a joint venture with Deep Blue Automobile to develop and produce high-performance, high-reliability automotive-grade IGBT modules and automotive-grade SiC MOSFET modules. It is expected that plant construction will be completed and production will begin in 2024.
Investment advice: We expect the company's net profit to be 10.42/1,36/16.14 billion yuan in 2024/25/26, respectively, and the corresponding current PE price in 2024-2026 will be 24/18/16 times, respectively. The company's customers are leading the way in the domestic IGBT field, and there is plenty of room for development in the fields of new energy vehicles, photovoltaics, etc. We are optimistic about the company's long-term development. Maintain a “Recommended” rating.
Risk warning: risk of insufficient product development iteration; risk of downstream demand falling short of expectations; risk of market competition.