Net profit returned to mother increased dramatically, and overseas business was actively carried out. The company achieved annual revenue of 3.05 billion yuan, up 40.5% year on year; net profit to mother was 610 million yuan, up 97.0% year on year; gross sales margin was 52.4%, +5.8 pcts year on year; and net sales margin was 19.9%, up 5.7 pcts year on year. In 2023, the company actively carried out overseas business, with foreign revenue reaching 470 million yuan, an increase of 27.0% over the previous year, accounting for 15.5%.

The main reason for the increase in the company's revenue in 2023 is that the market demand for LED display products continues to grow, demand in outdoor advertising, corporate applications and other fields continues to increase. At the same time, the expansion of emerging application scenarios such as XR virtual shooting and naked eye 3D has further promoted the progress of the industry.

The LED display control system+video processing system is two-wheel drive, and the capacity utilization rate remains high. The company's main revenue is as follows: 1. LED display control system revenue was 1.44 billion yuan, up 30.19% year on year, and gross sales margin was 42.2%, up 5.7 pcts year on year; 2. Video processing system revenue was 1.28 billion yuan, up 58.8% year on year, gross sales margin was 62.8%, up 4.0 pcts year on year; 3. The revenue from cloud-based information publishing and management systems was 160 million yuan, up 16.7% year on year, gross profit margin of 54.3%, up 7.6 pcts year on year.

Increase investment in R&D and enrich product matrices. In 2023, the company spent 440 million yuan on R&D, accounting for 14.5% of total revenue, an increase of 38.5% over the previous year. Based on core technologies such as high-precision full-grayscale brightness correction technology and small-pitch LED display image quality engine technology, the company has launched a variety of products with improved performance and rich application scenarios, enriching the product line in the field of LED display control and video processing. We expect that in the future, with enhanced technical strength and rich product matrices, the company will be able to provide users with one-stop solutions for different application fields, and its share will continue to increase.

Profit forecast and investment advice: We expect the company to achieve operating income of 43.0/57.4/7.43 billion yuan in 2024/2025/2026, up 40.8%/33.5%/29.5% year on year, and achieve net profit to mother of 9.6/13.1/1.78 billion yuan, up 58.3%/36.6%/35.8% year on year. As an industry leader, Nova Nebula has a first-mover advantage in technology. Product quality has reached world-class levels, and the share of overseas revenue is increasing year by year. At the same time, as downstream demand recovers and application fields expand, we believe the company will further benefit and maintain a “highly recommended” rating.

Risk warning: Demand recovery falls short of expectations; overseas progress falls short of expectations; R&D falls short of expectations.