Core views:
Weak demand weighed on full-year 2023 results. The company released its 2023 annual report, achieving revenue of 703 million yuan, YoY -28.25%; net profit to mother of 100 million yuan, YoY -71.63%; net profit after deducting non-return to mother of 88 million yuan, YoY -77.52%; gross profit margin of 46.59%, year-on-year.
The reasons for the decline in revenue include: 1. Weak demand for terminal consumer electronics due to factors such as the global macroeconomic downturn; 2. Sales and revenue of SPD products declined sharply due to factors such as weak demand in the PC and server market and inventory removal pressure from downstream memory module manufacturers.
At the same time, since the company participated in the strategic placement of Huahong's Science and Technology Innovation Board and held about 1.923,000 shares, the net profit and loss from changes in fair value was confirmed to be about -17.75 million yuan in 2023. After deducting the impact of related investment profits and losses, the net profit to mother was about 116 million yuan. Looking at the single quarter, 23Q4 revenue was 202 million yuan, YoY -23.22%, QoQ +9.24%; net profit to mother was 0.18 million yuan, YoY -81.19%, QoQ -4.86%; gross profit margin for the single quarter was 47.60%, +3.64pct.
SPD technology has accumulated profoundly, and downstream inventory adjustments have started again. The company has been developing and selling SPD products with DDR2/3/4 memory modules since the DDR2 generation, and is one of the few companies in the industry with a complete SPD product portfolio and technical reserves. For the latest DDR5 memory technology, the company cooperated with Lanqi Technology to develop SPD products supporting DDR5 memory modules, which have been applied on a large scale in major memory module manufacturers. After experiencing inventory removal from downstream memory module manufacturers, the company's SPD product sales and revenue showed a significant month-on-month increase in 23Q4, especially since December, and there is a clear recovery trend in related businesses. According to analysis data from some memory module manufacturers, the penetration rate of DDR5 memory modules is expected to exceed 50% by mid-2024.
Profit forecasting and investment advice. The company's EPS for 24-26 is estimated to be 2.80, 4.22, and 5.38 yuan/share, respectively. Referring to the comparable company valuation and the company's business growth, the company will be given a 24-year 30xPE valuation, with a corresponding reasonable value of 84.03 yuan/share, giving a “buy” rating.
Risk warning. DDR5 penetration fell short of expectations; downstream demand fell short of expectations; new product progress fell short of expectations.