Incident: The company released the 2023 report and forecast for the first quarter of 2024. In 2023, the company achieved revenue of 5.37 billion yuan, a year-on-year decrease of 3.1%, and realized net profit of 500 million yuan, a year-on-year decrease of 31.5%. In addition, the company expects to achieve revenue of 1.38 billion yuan in 2024Q1, an increase of 33.1% over the previous year, and achieve net profit of 130 million yuan to mother, an increase of 310.7% over the previous year.
Gross margin improved markedly in the fourth quarter, and profit is expected to rise high in the first quarter. The company achieved revenue of 1.51 billion yuan in the fourth quarter, an increase of 32.2% over the previous year, and achieved net profit of 180 million yuan to mother, an increase of 296.8% over the previous year. In terms of profitability, benefiting from improvements in the company's product structure in the fourth quarter, gross margin increased 3.1 percentage points month-on-month to 39.1%.
At the same time, the company released a performance forecast for the first quarter of '24, achieving net profit of 130 million yuan to mother, an increase of 310.7% over the previous year. Among them, R&D expenses are 330 million yuan, and equity payment expenses are 40 million yuan. If the impact of share payment fees is excluded, Q1's net profit to mother is about 170 million yuan.
Smart set-top boxes are expected to pick up steadily, and AI will empower large-screen TVs. According to the company's annual report data, due to global macroeconomic and downward industry cycle factors, set-top box shipments declined in the short term. Along with economic stabilization and steady progress in “smart switching,” global smart set-top box shipments are expected to increase 8.79% in '24. In terms of smart TVs, along with the application of AI technology, the experience is enhanced in the five areas of image quality, sound, interaction, connectivity, and creation. The company has cooperated deeply with Google, Amazon, Roku, RDK TV, etc., and added ecological cooperation such as Xumo and TIVO TV in '23, and is expected to further increase its market share in '24.
New products will gradually be commercialized, and revenue will increase further in Q2 and throughout the year. In terms of new products, ① the company's first 6nm commercial chip was successful, and it is expected to be used in automotive and smart devices in the future. ② The new Wi-Fi three-mode streaming film was successful (WiFi 6+BT 5.4+802.15.4), which supports Thread/Zigbee and enables applications such as Matter controllers and IoT gateways in terminal devices. ③ The 8K chip successfully passed the operator's tender certification test. It integrates a 64-bit multi-core processor and a self-developed NPU processor, and will soon be commercialized in batches in the domestic operator market. Looking ahead to the second quarter and the full year of '24, the company's revenue is expected to increase further year over year.
Profit forecasting and investment advice. The company's net profit for 2024-2026 is estimated to be 710 million yuan, 940 million yuan, and 1.13 billion yuan, respectively, and EPS is 1.70 yuan, 2.24 yuan, and 2.71 yuan respectively, corresponding to dynamic PE of 32 times, 24 times, and 20 times, respectively. The company was given 40 times PE in 2024, corresponding to a target price of 68.00 yuan, maintaining a “buy” rating.
Risk warning: the risk of a sharp reduction in product prices due to increased competition in the industry; the risk that the procurement price of raw materials will rise sharply; the risk that product development progress falls short of expectations, etc.