2023 results surpassed our expectations
The company announced 2023 results: 1) 2023 operating income of 13.447 billion yuan, +16.05% year-on-year; net profit to mother of 1,283 billion yuan, -15.37% year-on-year. It is proposed to pay a cash dividend of 6 yuan for every 10 shares, corresponding to a cash dividend rate of 32%. 2) Corresponding to 4Q23, the company achieved revenue of 4.885 billion yuan, +95.0% year-on-year; net profit to mother was 418 million yuan, +13.2% year-on-year. 3) The company's performance was higher than our expectations, mainly due to the sharp increase in smart TV business shipments in the second half of the year exceeding expectations.
Demand for color TV in emerging markets is booming, and competition for interactive screens is still fierce. 1) The company's downstream smart TV customers are mainly local brands in emerging markets, benefiting from the high demand for local color TV and the company's smooth expansion of new customers in the North American market, driving the company's smart TV revenue +32% year over year and shipment volume +37% year over year in 2023. The performance in the second half of the year was significantly better than in the first half of the year. 2) After experiencing high growth in 2020-2021, the overseas smart interactive tablet market began to be removed from inventory in 2H22. Although 2H23 shipments have begun to recover, increased competition in the industry has led to a marked decline in the average shipping price of the company's products. In 2023, the company's smart interactive tablet business revenue was -33% year-on-year, and shipment volume -24% year over year.
New businesses are developing rapidly, leading in segment share. 1) The company's new business is developing rapidly. The performance of the e-sports screen was outstanding, with annual revenue +170% year-on-year and shipments +241% year-on-year. The performance was better than the industry, driving a continuous increase in share. 2) In addition, in recent years, the company has stepped up efforts to develop new categories represented by mobile smart screens, beauty mirrors, and live broadcasters, mainly the three private brands of Haoli, KTC, and FPD. In 2023, revenue from innovative display products was 960 million yuan, +129% year-on-year, and the revenue share increased to 7.2%.
Financial analysis: The overall panel cost in 2023 increased significantly compared to 2022, compounded by the development of new orders and increased competition in the interactive tablet industry, leading to pressure on the average price of the company's products. Under the combined influence, the company's gross margin reached -3.3ppt to 17.8% year-on-year under the combined influence, but 4Q23 began to show a month-on-month improvement trend. Expense rate control is relatively good, and the various fee rates in 2023 were basically flat or increased slightly year-on-year.
Development trends
Recently, the company announced the 2024 stock options incentive plan. The total number of target recipients is no more than 2,154, including company directors, senior management, core management and core technical business personnel. The scope of incentives has been expanded compared to 2023. The performance assessment index is 2024-2026 revenue, corresponding to CAGR ~ 12%. We believe that the company has leading R&D and manufacturing advantages in the field of smart displays, the traditional main business is steady, and the new business is progressing smoothly, and is expected to continue to contribute to revenue growth.
Profit forecasting and valuation
Considering TV customers and the smooth development of new businesses, we raised our 2024/2025 profit forecast by 8%/3% to 1,461 billion yuan/1,663 billion yuan. The current stock price corresponds to 2024/2025 12.4x/10.9x P/E.
Maintaining an outperforming industry rating and considering the increase in performance and the recovery in block valuation, we raised our target price by 15.5% to 33.5 yuan, corresponding to 15.7x/13.8x P/E in 2024/2025, with an upward space of 26.5%.
risks
LCD panel price fluctuation risk; competition intensifies risk; industry demand fluctuation risk.