2023 Results Exceed Our Expectations
The company announced 2023 results, with revenue of 22.269 billion yuan, +3.92% year over year; gross profit margin of 11.67%, YOY-2.24ppt; net profit to mother of 169 million yuan, YoY -66.25%; net profit after deducting non-return to mother of 59 million yuan, YoY -83.32%. 4Q23's revenue was 6.363 billion yuan, YoY +4.14%, QoQ +6%; gross profit margin was 12.63%, YoY+2.89ppt; QoQ remained flat; net profit attributable to mother was 233 million yuan; net profit not attributable to mother was 219 million yuan. The recovery momentum was strong in the fourth quarter, and full-year results exceeded our expectations.
Development trends
Looking back at 2023: Traditional businesses faced major challenges. The global semiconductor market experienced a downward cycle in 2023, and the company's capacity utilization rate and gross margin declined. At the same time, Tongfu Chaowei Penang increased its procurement of materials and equipment in order to further increase its market share, resulting in the company's net exposure to US dollars and foreign currency liabilities. Large fluctuations in the US dollar and RMB exchange rate caused the company's exchange losses, affecting net profit of 190 million yuan to mother. Excluding the impact of this non-operating factor, the company's net profit to mother was 359 million yuan. In 2023, Suzhou and Penang achieved total revenue of 15.529 billion yuan, an increase of 7.95% year-on-year, and achieved a total net profit of 671 million yuan.
Looking ahead to 2024: Waiting for AI terminals to bring new momentum. We have seen that as terminal chip inventories are gradually cleared to a reasonable level, 2024 is expected to be a recovery year for the sealing and testing sector, and the company's traditional business is expected to achieve positive year-on-year growth. At the same time, we believe that AI terminals, especially AI PCs and AI servers, will bring incremental space to the company's customers while bringing incremental sealing and testing business space to the company. Among them, we continue to be optimistic about the company's development in the Chiplet field, and the development of new technologies and products represented by 2D+. According to the announcement, the company's ultra-large 2D+ packaging technology, 3-dimensional stacking packaging technology, and large-size multi-chip chiplast packaging technology have been verified, and we believe it is expected to become a new driving force for the company's growth in the future.
Profit forecasting and valuation
Considering that the company adjusted its accounting estimation method in 2024, the company expects the depreciation of fixed assets to decrease by about $537 million in 2024, resulting in an estimated increase of about 373 million yuan in net profit and net assets.
We kept our revenue forecast for 2024 unchanged, raised our 2024 profit forecast by 66% to $1,096 billion, and first introduced a 2025 revenue forecast of $30.367 billion and a net profit forecast of $1,292 billion. Maintain outperforming industry ratings. The company's current stock price corresponds to 2.1x P/B in 2024. Considering that although inventory is cleared, terminal demand is still under some pressure, maintaining a target price of 23.27 yuan, corresponding to 2.4x P/B in 2024, there is room for 14% increase compared to the current stock price.
risks
Downstream demand for consumer electronics continues to weaken; demand for AIPC and AI servers is weak; R&D progress falls short of expectations.