Core views:
Incident: The company released its 2023 annual report, with revenue of 23 billion yuan (YoY -33.02%); net profit attributable to mother of 272 million yuan (YoY -66.15%); net profit excluding non-attributable net profit of 266 million yuan (YoY -66.12%).
Comment: The downstream economy is expected to gradually pick up, and product categories can be expected to expand and grow. Looking at a single quarter, the 23Q4 company's revenue was -38.07%/-0.85% year-on-month, respectively. By business, revenue from the self-production/agency business was 920 million yuan (YOY -33.03%/-32.85%). Revenue from the self-produced porcelain capacitor business decreased by 38.10%, and filters, microcontrollers and supporting integrated circuit products achieved revenue of 0.25/55 million yuan respectively. Demand from core customers in the agency business was affected by the external environment; the gross margin of each business was 63.71%/10.61% (YOY-17.20/0.17pct), respectively. The main core product, porcelain dielectric capacitors, were affected by both price decline and unit cost increase, while the revenue structure of low margin products increased. We believe that the company's gross margin level is expected to improve along with the recovery of the downstream economy. On the cost side, the cost rate for the period was 19.24% (YoY+7.96pct), of which the sales/management/ development/ finance ratio was 5.70%/6.95%/6.39%/0.21% (YoY+2.66/5.29/2.45/0.01pct), respectively. The company expanded its sales team to expand new business, while management personnel costs increased, and the cost ratio increased year-on-year. At the same time, the company continues to increase investment in scientific research around products such as ceramic capacitors, filters, and microprocessors to enrich the company's product line. On the asset side, the company's monetary capital and transactional financial assets at the end of '23 totaled 1,693 billion yuan, an increase of 464 million yuan over 23Q3, and the cash situation on book improved.
Profit forecasting and investment suggestions: On the pattern side, the company has upstream components/supporting components in many key areas. The pattern in the high-reliability field is stable, and it is expected to take the lead in benefiting from the medium- to long-term boom in aerospace and other fields; on the revenue side, multi-layer ceramic capacitors are used as the main line to expand various categories of products such as filters, and the contribution to performance is gradually increasing. EPS is expected to be 1.56/2.05/2.63 yuan/share in 24-26, giving the company a 24-year PE valuation 25 times, corresponding to the company's reasonable value of 38.91 yuan/share, maintaining the purchase rating.
Risk warning: low expectations for new product expansion, low expectations for equipment demand and delivery, policy adjustments, etc.