Revenue was in line with expectations, and profits were under pressure. Zhuo Shengwei announced its 2024Q1 performance forecast. It is expected to achieve revenue of 1.19 billion yuan in 24Q1, an increase of 67% year on year and a decrease of 9% month on month; achieve net profit due to mother of 1.92-198 million yuan, up 65%-70% year on year, decrease 43%-44% month on month; achieve net profit without deduction of 1.91-197 million yuan, up 62%-67% year on year, and a decrease of 40%-42% month on month.
The year-on-year improvement in performance was mainly due to terminal customers still in the inventory phase during the same period last year, but starting in the second half of last year, a new inventory replenishment cycle began, and superposition companies relied on self-built production lines to continuously increase their market development efforts for RF filter module products, and the scale effect of module products brought about by filter breakthroughs continued to increase.
However, at the same time, we also saw a significant month-on-month decline in performance. Leaving aside the impact of seasonal factors, we determined that the main reason was that the company continued to advance the development of L-pamid products, which led to an increase in related R&D expenses. Furthermore, depreciation pressure brought about by the Xinzuo production line is also gradually showing, so the profit side is under pressure.
The proportion of modules is steadily increasing, waiting for L-pamid to be released. We believe that the company's future focus will still be on creating more cost-effective module products based on self-developed PA and Xinzuo's own filters, especially transceiver modules represented by L-Pamid. As the “pearl” product with the highest technical complexity and integration among RF front-ends, L-PAMID will have an important impact on the redivision of the domestic competitive landscape. Currently, the company's L-PAMID is still in the research stage. In 2022, the company's module products achieved revenue of 1.12 billion yuan, increasing to 30.4%. With the release of subsequent L-pamid products, we expect that module revenue will exceed that of discrete devices in 2025.
Xinzuo is progressing smoothly and continues to strengthen Fab-Lite's competitive barriers. We have seen that since the launch of the Xinzhuo project on November 28, 2020, up to 23H1, the project has invested a total of 5.738 billion yuan, with more than 160 million self-produced filters integrated into products such as DiFeM, L-DiFem and GPS modules delivered by the company; as of 23Q3, high-end MAX-SAW shipments already account for about 50% of the company's filter shipments, and the proportion of module products with integrated in-house filters already ranks first among all module products. Looking forward to the future, we are optimistic that the company will continue to strengthen its supply chain advantages under the Fab-Lite model and enhance product iteration and mass production capabilities through close cooperation in design and manufacturing.
Profit forecast and investment advice: Therefore, we maintain that the company achieved revenue of 43.8/56.4/6.71 billion yuan in 2023/2024/2025, up 19.1%/28.8%/19.0% year on year, and achieved net profit of 11.6/16.0/2.05 billion yuan, up 8.9%/37.3%/28.3% year on year. The current stock price corresponding to 2024/2025 PE is 30/23X, respectively, maintaining the “Highly Recommended” rating.
Risk warning: R&D progress falls short of expectations; industry competition intensifies; downstream demand is insufficient.