Incident: Ziguang Guowei released its 2023 annual report on the evening of April 17. In 2023, the company achieved revenue of 7.565 billion yuan (YoY +6.26%), net profit attributable to mother of 2,531 billion yuan (YoY -3.84%), and net profit not attributable to mother of 2,391 billion yuan (YoY -2.88%). Corresponding to the 4Q23 quarter, the company achieved revenue of 1,923 billion yuan (YoY -11.94%, QoQ +0.79%), net profit of 500 million yuan (YoY -15.46%, QoQ -21.78%), and net profit of 469 million yuan after deducting non-attributable net profit (YoY -7.46%, QoQ -21.77%).
The overall special integrated circuit business is stable, and the development of new products is progressing smoothly. The company is a leading special integrated circuit enterprise in China. Its products cover several series of products such as microprocessors, programmable devices, memories, networks and interfaces, analog devices, ASIC/SoPC, etc., with more than 600 varieties. In 2023, in the face of a complex external situation and severe market environment, the downstream demand of the industry was greatly impacted, and the company achieved overall stable business performance through a combination of measures. In 2023, the company's special integrated circuit achieved revenue of 4.488 billion yuan (YoY -5.02%) and achieved a gross profit margin of 73.22% (YoY-0.7pct). In terms of specific products, the company's FPGA products continue to maintain a leading position in the industry, and next-generation higher performance products have been recognized by some core customers and have entered the comprehensive promotion stage; special memory continues to maintain the most comprehensive domestic series and the most advanced technology leading position; the newly developed special NAND Flash has been introduced to the market, and the development of the new special type of memory has been completed; network and interface products closely follow customer needs and launch three new products, becoming one of the companies with the widest range of industry categories; system-level chips such as special SoPC have been widely recognized by users, and fourth-generation products have already been completed in the early stages Solution promotion and application in many fields; the newly expanded RF-SOC products have been verified by core customers and can meet application requirements in specific fields; special processor series products such as general MCU, image AI smart chips, and digital signal processor DSP have been developed and selected by customers. The development of products such as high-end MCU and video processing chips is progressing smoothly; the analog product field has completed a large number of new product development work in seven directions, including analog-to-digital converters, leading the country in many product indicators.
Smart security chips are growing rapidly, and their position in overseas markets continues to rise. In 2023, the company's smart security chips achieved revenue of 2,842 billion yuan (YoY +36.67%), gross profit margin of 46.14% (YoY -0.35%), and achieved significant growth in both revenue and profit. The company continues to cultivate the telecom SIM card market and achieve a leading position in the global SIM card chip market. The company and partner jointly launched an eSIM one-stop solution and obtained GSMA's SAS-UP qualification certificate. In terms of financial payments, the company actively promoted the implementation of application projects and became a digital yuan hard wallet chip supplier for the Chengdu Universiade and Hangzhou Asian Games. In addition, the company is actively developing high-reliability chip businesses such as automotive electronics. Vehicle Regulation SE has received market recognition in the fields of digital keys, T-BOX, etc., and has been introduced to dozens of OEMs and Tier 1 to achieve mass production and loading.
Investment advice: The company's net profit for 24/25/26 is estimated to be 26.98/35.79/4.701 billion yuan, corresponding to the current PE price, which is 19/14/11 times, respectively. The company is a leading domestic special integrated circuit platform enterprise. It will continue to benefit from the growth of the special IC industry and the increase in domestic replacement demand, and maintain a “recommended” rating.
Risk warning: risk of fluctuating demand in the downstream market; risk of fluctuating upstream supply; risk of increased market competition; risk of new product development falling short of expectations; risk of attracting talent and maintaining the ability to innovate.