The 23-year results were under pressure, and the profit side was affected by the accrual impairment of accounts receivable from major customers. According to the company's 23-year performance report, the company achieved revenue of 400 million yuan in 23, a year-on-year decrease of 20%, and achieved a net loss of 12.93 million yuan to mother, a year-on-year decrease of 123%, after deducting a net loss of 14.57 million yuan from non-return to mother, a year-on-year decrease of 127%. The decline in revenue is mainly due to the fact that most of the company's products are consumer upgrade products. Affected by factors such as the downturn in the global economic cycle, consumer demand in the terminal market is insufficient, and the export sales of the company's consumer complete machine products fell short of expectations. At the same time, profit-side companies were affected by impairment losses on large accounts receivable amounting to approximately 33 million from Sleepme Inc., a major consumer machine customer. 23 The company lost 35 million yuan in credit impairment in the first three quarters. Previously, asset impairment losses were relatively stable, at only 3.5 million yuan for the whole year. The company's gross margin was relatively stable. The gross profit margin for the first three quarters of 23 was 25.5%, a slight decrease of 0.6 pct from the end of '22.

Short-term demand for consumer products is under pressure, and the company is actively exploring emerging application scenarios. The consumer electronics sector is currently the largest application market for semiconductor thermoelectric refrigeration technology, helping to achieve rapid cooling or accurate temperature control in a limited space.

On the one hand, as a consumer upgrade product, demand for the company's complete consumer products such as beer machines is relatively weak. On the other hand, Sleepme Inc., the company's main thermostatic mattress customer, initiated the ABCs program, putting corresponding pressure on revenue and profits. At the same time, the company is actively expanding new product application scenarios. In April 2023, the company launched smart wearable air conditioning products at the Canton Fair and founded its own brand. In the future, the company will continue to advance progress in the fields of smart wearables, pet consumption, etc., which is expected to hedge against the impact of the industry at the macro level and single customers.

High-end TEC pioneers benefit from the blue ocean market for high-speed optical modules. MicroTEC is an important component for high-speed optical modules. In '22, the company achieved mass production of high-performance miniature thermoelectric refrigeration devices for temperature control of optical modules in 5G networks. MicroTEC implementation for 400G high-speed optical modules requires sample delivery to downstream optical module manufacturers for verification, and sample delivery to more than 30 optical communication customers to achieve batch supply at many leading companies. At present, the company has a production capacity of 3 million MicroTEC pieces per year, and can rapidly expand production according to downstream demand. It is expected to benefit deeply from supply-side domestic substitution and strong demand for demand-side data centers and optical communications. High-performance TEC is also expected to achieve a breakthrough from zero to one.

We forecast that the company's earnings per share for 23-25 will be -0.14/0.50/0.71 yuan, respectively (the original 23-24 forecast was 0.82/1.17 yuan, mainly increasing 23-year credit impairment losses, increasing the cost rate forecast, and lowering the company's revenue and gross margin forecast). Based on the comparable company's 24-year PE valuation 49 times, the corresponding target price was 24.50 yuan, downgraded to an additional holding rating.

Risk warning

Demand recovery falls short of expectations, expansion of high-end products falls short of expectations, overseas business falls short of expectations, risk of exchange rate fluctuations, risk of excessive share of major customers of thermoelectric equipment products, and risk of asset impairment.