Incidents. On April 16, the company released its 2023 annual report and 2024 quarterly report. In 2023, the company achieved revenue of 683 million yuan, a year-on-year decrease of 18.65%; realized net profit to mother of 66.57 million yuan, a year-on-year decrease of 60.48%. In the first quarter of 2024, the company achieved operating income of 194 million yuan, a year-on-year increase of 19.73%; realized net profit of 18.2.33 million yuan, a year-on-year decrease of 45.11% and a year-on-year increase of 34.68%.
Annual results were briefly under pressure, and the downstream market gradually picked up, driving the company's steady development. The global macroeconomic economy has been sluggish since the first half of 2023, and demand in the communications market is weak. The overall connector market has entered a stage of weak demand, compounding the impact of market inventory removal, putting pressure on the company's performance. In 2023, the company achieved revenue of 683 million yuan, a year-on-year decrease of 18.65%; realized net profit to mother of 66.57 million yuan, a year-on-year decrease of 60.48%.
However, since the third quarter of 2023, demand in the communication connector market has gradually picked up, and the company's fourth quarter results showed a recovery trend. In 2023, Q4's revenue was 192 million yuan, up 5.83% year on year and 20.92% month on month; net profit to mother was 13.538 million yuan, up 69.03% month on month. The company continues to innovate products and promote deepening cooperation with existing customers. In the first quarter of 2024, the company achieved operating income of 194 million yuan, an increase of 19.73% over the previous year, and achieved net profit of 182.33 million yuan, a year-on-year decrease of 45.11%, and an increase of 34.68% over the previous year. We believe that as the inventory removal cycle gradually passes and downstream market demand continues to pick up, the company's business will develop steadily and performance will gradually recover.
Adhere to technological innovation drive, equity incentives boost confidence in development. In a period of sluggish market demand, the company still insists on promoting product and technological innovation and upgrading, and reserving development momentum. In 2023, the company invested 72.685 million yuan in R&D, an increase of 10.84% over the previous year, continuously improving product competitiveness. In terms of high-speed communication connector modules, the company is still based on downstream customers, with I/O connector shell products as the main direction, developing towards higher speed QSFP-DD 112G/OSFP series products. At the same time, in terms of backplane connectors, the company is also developing multiple projects to meet the company's diversified development; in terms of new energy business modules, new projects such as battery management module water cooling board projects and BMS products have been added. On March 16, the company released a draft equity incentive plan for 2024, which intends to grant 1.083 million restricted shares to incentive recipients. The current equity incentive plan has set performance assessment targets for 2024-2026. The target performance trigger values for 2024-2026 are based on 2023 net profit, with a net profit growth rate of 40%/88%/138%; the target values are based on 2023 net profit, respectively, with a net profit growth rate of 50%/110%/173%. The company continues to promote technology accumulation, while introducing equity incentive programs to continuously boost employee confidence, which will help the company develop steadily over the long term.
Profit forecast and investment rating: We predict that the company's net profit for 2024-2026 will be 0.95/1.28/171 million yuan, and the 2024-2026 EPS will be 0.96/1.29/1.72 yuan, respectively. The current stock price corresponding to PE is 52/39/29 times, respectively. Based on the gradual recovery of demand for the company's communication connector products and the continuous release of production capacity in various regions, we are optimistic about the company's future development and maintain a “buy” rating.
Risk warning: macroeconomic risk, increased risk of market competition, risk of technological iteration, risk of declining gross margin.