23Q4 net profit without return to mother increased 3.08% month-on-month in a single quarter, and there was an improvement on the profit side.

The company's revenue in 2023 was 4.531 billion yuan, down 16.28% year on year, net profit to mother was 537 million yuan, down 31.93% year on year. Net profit after deducting non-return to mother was 491 million yuan, down 34.23% year on year. The year-on-year decline in net profit after deducting non-return net profit was mainly due to a 3.78 pct/1.53 pct year-on-year increase in the R&D/sales expenses ratio in 23.

23Q4 revenue in a single quarter was $1,111 billion, down 7.31% month-on-month, net profit to mother was up 15.43%, net profit after deducting $145 million, up 3.08% month-on-month; gross profit margin was 38.38%, up 1.28 pct month-on-month, net interest rate due to 15.20% month-on-month increase, 2.99 pct month-on-month, net profit margin 13.04%, up 1.31 pct month-on-month. The month-on-month increase in net profit to mother mainly benefited from the increase in net investment income and government subsidies.

Compute chip revenue for the consumer market was +44% year over year, and memory chips are still at the bottom.

In 2023, memory chip revenue was 2,911 billion yuan, down 28.19% year on year, accounting for 64.26% of total revenue. The gross profit margin was 36.48%, down 0.37 pct year on year. The year-on-year decline in revenue was due to a large year-on-year decline in industrial/medical markets, and the year-on-year decline in automobiles was relatively small. Among them, single 23Q4 revenue was 691 million yuan, down 4% from the previous quarter.

The second-largest business computing chip had revenue of 1,108 billion yuan in 2023, up 43.91% year on year, accounting for 24.46% of total revenue. The gross profit margin was 27.95%, down 2.52 pct year on year. The year-on-year increase in revenue mainly benefited from significant growth in consumer IPC. Among them, single 23Q4 revenue was 293 million yuan, down 14% from the previous month. It was mainly affected by the upcoming 24Q1 traditional off-season, and customer demand for delivery weakened.

The third-largest business simulation and connected chips had revenue of 409 million yuan in 2023, down 14.58% year on year, accounting for 9.03% of total revenue. The gross profit margin was 51.34%, down 1.65 pcts year on year. The year-on-year decline in revenue was mainly due to the downward phase of the industry market for analog and connected chips in '23. Among them, single 23Q4 revenue was 111 million yuan, an increase of 1% over the previous month.

The comprehensive layout of “computing+storage+simulation” strengthens the market development of new products and lays the foundation for the company's future growth.

(1) In terms of memory chips, mass production of the 2023 8Gb LPDDR4 has begun, and 21nm DRAM products are being developed. (2) In terms of computing chips, mass production of the X2600 series for display control/printers, etc. and the T23 for the H.264 dual-camera platform upgrade product was completed in 2023. (3) In terms of analog and connected chips, GreenPhy completed mass production in 2023 and is expected to contribute a certain amount of revenue in 24. Automotive-grade LIN SBC and CAN SBC have already been introduced to the market.

The world's leading automotive IC company is deeply involved in the three major product lines and maintains an “increase” rating.

The company is a scarce automotive IC leader in China, with a comprehensive layout of automotive-grade chip platforms. With the collaborative development of the company's various segments, the company's net profit from 2024 to 2026 is estimated to be 6.01/7.31/901 million yuan respectively, corresponding to PE of 49.5/40.7/33.0 times in 24/25/26, maintaining a “gain” rating.

Risk warning: macro risk; product development risk; gross margin decline risk; inventory risk, etc.