4Q23 revenue grew month-on-month, and profitability improved quarterly. The company released its 2023 annual report, with 2023 revenue of 174.543 billion yuan (YoY -2.2%) and net profit to mother of 2,547 billion yuan (YoY -66.3%).
4Q23 revenue was $48.028 billion (YoY +5.2%, QoQ +3.6%), and net profit to mother was 1,525 billion yuan (YoY -32.5%, QoQ +432.7%). In 2023, in the context of supply-side on-demand production, LCD TV panel prices fluctuated moderately, and the company's profitability gradually improved. Since 3Q22, the company's gross margin has continued to improve month-on-month, and 4Q23 gross profit margin was 16.2% (YoY +10.3pct, QoQ +1.4pct).
LCD TV panel prices began to rise in February, and industry leaders are expected to fully benefit. In the second half of 2022, the LCD industry supply side began to control LCD TV panel prices by controlling the operating rate. LCD TV panel prices fluctuated moderately in 2023, and panel manufacturer performance improved quarterly. In 2023, the company's display devices achieved revenue of 147.53 billion yuan, a year-on-year decrease of 2.06%. The overall LCD and five mainstream application shipments remain the world's first, and many technologies and products have been launched globally. At the same time, the company continues to optimize its product structure in the LCD field, maintaining breakthroughs in high-end flagship products. Oversized (≥85 inch) products have achieved the highest shipment volume in the world, and ADS Pro technology products in the high-end TV market have sold nearly one million pieces. The first quarter is a low season for the industry. Under the panel factory's production strategy, LCD TV panel prices began to rise in February and accelerated in March. It is expected to maintain an upward trend in April, driven by peak season stocking demand. The industry is expected to enter a new stage of stable profit, and the company as an industry leader will fully benefit.
OLED mobile phone panel shipments are growing rapidly, and investment in high-generation OLED production lines has consolidated its leading position. According to Qunzhi Consulting, global demand for flexible OLED smartphone panels increased significantly in 2023, with 530 million units shipped throughout the year, an increase of 33% over the previous year. The company shipped nearly 120 million flexible AMOLED sheets in 2023, a significant increase over the previous year, and the profitability of mature production lines improved significantly over the same period last year. The company actively seized market opportunities, initiated the construction of the first 8.6th generation AMOLED production line in China, and continued to consolidate its leading position in the semiconductor display industry.
IoT transformation business IoT innovation, sensing, MLED and smart healthcare are growing rapidly. The company deployed IoT innovation, sensing, MLED and smart medical businesses in the IoT transformation process, and related businesses grew rapidly year-on-year in 2023. In 2023, the company's IoT innovation business generated revenue of 38.9 billion yuan (YoY +13.3%).
Sensor business revenue was 405 million yuan (YoY +32.13%), MLED business revenue was 2,902 million yuan (YoY +81.42%), and smart medical business revenue was 2,792 billion yuan (YoY +26.71%).
Investment advice: We expect the company's net profit to be 47.29/103.46/12.453 billion yuan in 2024-2026 (the previous value was 44.47/10.417 billion yuan in 2024-2025), with year-on-year growth rates of 85.6%/118.8%/20.4%, respectively, corresponding PB of 1.24/1.18/1.12 times. We are optimistic that panel prices will fluctuate moderately, and the industry is expected to enter a new stage of stable profit. As an industry leader, the company will fully benefit and maintain a “buy” rating.
Risk warning: Panel prices fluctuate, demand falls short of expectations, and the company's OLED business falls short of expectations.