Net profit due to mother fell 3.84% in '23, maintaining a “buy” rating
Ziguang Guowei released its annual report. In 2023, it achieved revenue of 7.565 billion yuan (yoy +6.26%), net profit to mother of 2,531 billion yuan (yoy -3.84%), and deducted non-net profit of 2,391 billion yuan (yoy -2.88%). Among them, Q4 achieved revenue of 1,923 billion yuan (yoy -11.94%, qoq +0.79%) and net profit to mother of 500 million yuan (yoy -15.46%, qoq -21.78%). We expect the company's 2024-2026 EPS to be 4.01, 5.07, and 6.19 yuan respectively (previously 2023-2025 3.21, 4.27, and 5.57 yuan). Comparatively, the company Wind agreed to expect an average PE value of 23 times in 24, giving the company 23 times PE in 24 years, with a target price of 92.23 yuan (previous value of 132.37 yuan), maintaining a “buy” rating.
Special chip revenue declined slightly. Smart security chip revenue achieved relatively rapid growth by business segment. In 23, the company's special integrated circuit business achieved revenue of 4.488 billion yuan, a year-on-year increase of -5.02%, gross margin of 73.22%, a year-on-year decrease of 0.70pcts. In '23, the company's FPGA products continued to maintain a leading position in the industry market, and the range of users continued to expand. The new generation of higher performance products was recognized by some core customers and entered the comprehensive promotion stage; the smart security chip business achieved revenue of 2,842 billion yuan, an increase of 36.67% year on year. The gross margin was 46.14%, up -0.35 pcts year on year; the crystal components business achieved revenue of 185 million yuan, or -35.49% year over year. The gross margin was 9.03%, down 18.25 pcts, mainly due to factors such as the cyclical decline in the industry and the slowdown in procurement due to customer inventory loss.
R&D investment increased significantly, and cash flow remained stable
The cost rate for the 23-year corporate period was 26.38%, up 2.23pct from '22. Among them, the sales expense ratio was 3.81%, a decrease of 0.02 pct; the management cost rate was 4.16%, an increase of 0.80 pct; the R&D cost rate was 18.79%, up 1.78 pct from '22. The company increased its R&D investment and obtained 149 patent licenses throughout the year. New industrial-grade product lines and radiation-resistant product lines were launched in the FPGA field.
In terms of cash flow, the company's net operating cash flow in '23 was $1,772 million, up 2.63% from '22.
Accounts receivable and notes were $6.171 billion, up 14.23% year on year, and inventory was $2,513 billion, up 13.56% year over year.
Expand new products to consolidate competitive advantage, and continue to enrich the product spectrum
In 2023, the company's special chip business continued to develop new products. System-level chips represented by special SoPC platform products were widely recognized by users. Fourth-generation products have completed early program promotion and have been applied in many fields; special processor series products such as general MCU, image AI smart chips, and digital signal processor DSP have been developed and selected by users in promotion; in the field of analog products, the company completed a large number of new products in seven directions, including analog to digital converters, isolation devices, high-performance clocks, switching power supplies, linear power supplies, monitoring circuits, and protective devices R & D work, leading domestic product indicators in many product indicators.
The company's product spectrum continues to be rich, and its core competitiveness and customer stickiness continue to improve.
Risk warning: Risk of orders falling short of expectations, risk of falling product prices.