Incident: On April 15, 2024, the company released its 2023 annual report, achieving annual revenue of 4.221 billion yuan, +8.97% year over year; net profit to mother of 173 million yuan, or -46.99% year on year; net profit after deducting non-return to mother of 150 million yuan, +149.95% year over year.
Full year results are in line with expectations. On a quarterly basis, 23Q4 achieved revenue of 981 million yuan, +2.74% YoY and -15.73%; net profit to mother of 62 million yuan, +330.04% YoY, +134.82% month-on-month; net profit of 67 million yuan, +189.57% YoY and +329.57% YoY.
Gross margin declined year-on-year, and cost control capabilities continued to be optimized. 1) Gross profit margin: In 2023, the company's gross margin was 14.35%, -3.61 pct year-on-year. Among them, 23Q4 gross margin was 17.71%, +5.93 pct year over year, and +3.71 pct month over month. As the operating rate continues to rise, the company's gross margin is expected to improve quarter by quarter. 2) Period expenses: The company focuses on open source and savings, and continues to promote cost reduction and fee control. The company's expense ratio for the 2023 period was 10.50%, -1.49 pct. Among them, sales, management, R&D, and finance expenses were 2.23%, 6.98%, 4.57%, and -3.28%, respectively, +0.24, -0.52, -1.24, and +0.03 pct year-on-year, respectively.
The technical level continues to improve, and high-end products continue to make breakthroughs. 1) Continue to increase investment in R&D. The high-end MLCC pilot platform, the high-end electronic material platform, the thin film micro-nano platform, and the reliability testing and analysis platform have all been built and put into use, further consolidating the independent research and development capabilities of the entire industry chain of materials, processes and products. 2) Solve multiple key material challenges. High-voltage and high-reliability porcelain powder based on a novel medium material was developed for the first time in China, and the pressure resistance and reliability of medium- and high-capacity MLCC were greatly improved; for the first time in China, it broke through the development and application of base metal electrode paste for thick film resistors, and successfully launched low resistance resistors for copper electrodes; mass production of internal electrode slurries for high frequency inductors was achieved. 3) Break through a number of key technologies for high-end products. The first company in China to complete the development of 0603X106M350N and 0603X226M100N, which are typical specifications in the high-end communication field. The industrial grade medium and high voltage product 0805B105K101N reached the highest voltage level in the industry.
Profit forecast: We expect net profit to be 3.92 billion yuan, 5.26 million yuan, and 776 million yuan respectively in 2024-26, maintaining a “buy” rating.
Risk warning: Terminal demand recovery falls short of expectations; mass production of high-end products falls short of expectations, etc.