Incident: The company released its annual report for 2023. For the full year of '23, the company achieved operating income of 10.208 billion yuan, a year-on-year decrease of 15.01%; net profit to mother of 1,007 billion yuan, an increase of 11.14% over the previous year; and net operating cash flow of 1,478 billion yuan, a sharp increase of 155.12% over the previous year. The performance was in line with market expectations.
Comment:
It is perceived that the business has grown significantly, but due to the impact of the communications business, the company's overall revenue has declined. By business: 1) Laser processing equipment and intelligent manufacturing production lines: revenue of 3.190 billion yuan, yoy -3.00%; 2) sensitive components: revenue of 3.248 billion yuan, yoy 40.02%, the company's NEV PTC thermal management system business continues to grow, and technology research and development capabilities continue to improve; 3) Optoelectronic device series products: revenue of 3.110 billion yuan, yoy -45.52%. The decline in revenue was mainly affected by the 5G construction cycle, due to the reduction in the scale of network terminal business delivery; 4) Laser holographic film series products: revenue of 501 million , yoy -12.63%.
The gross margin of multiple businesses improved, and the company's profitability continued to increase. In 2023, the company's gross sales margin was 23.11%, up 3.95% from '22. By business: 1) Laser processing equipment and intelligent manufacturing production lines: 23 gross profit margin of 33.93%, up 1.65% from the same period in '22; 2) sensitive components: 23.99% gross profit margin in '23, up 2.75% over the same period in '22; 3) Optoelectronic device series products: 23-year gross margin of 9.47%, up 0.54% from the same period in '22; 4) Laser holographic film series products: gross profit margin of 35.01% in '23, down 3.77% from the same period in '22.
The three core businesses are working together, and the company has broad prospects for growth. 1) Intelligent manufacturing business: The company's intelligent equipment business group focuses on two high-quality tracks of new energy and intelligent manufacturing to vigorously explore markets in key industries such as new energy vehicles, shipbuilding, rail transit, and machinery manufacturing; 2) Link business: According to the company's 2023 annual report, the company delivers a full range of 400G and below optical modules on a large scale and enters many leading Internet vendors at home and abroad; 800G products carry out connectivity tests to achieve small-batch delivery, and actively layout the development and production of next-generation ultra-high speed optical modules; 3) Sensing business: The company continues to maintain smart home sensors The leading position in the global industry in the field focuses on new energy and its upstream and downstream industrial chains, and focuses on “industry-leading, specialized and innovative” products.
Profit forecast and valuation: Considering the weak demand for the downstream communication small base station business, we lowered our 24-25 profit forecast and added a 26-year profit forecast. The estimated net profit for 24-26 was 1,268 billion yuan, 1,606 billion yuan, and 2.07 billion yuan, respectively (the previous 24-25 forecasts were 1,552 billion yuan and 1,999 billion yuan), and the corresponding PE was 25, 20, and 16X, respectively.
Considering: 1) According to Wind's unanimous forecast, the comparable company Zhongji Xuchuang PE was 31X in 24, and the company's PE level was lower than that of the comparable company's PE; 2) the company focused on the two major tracks of new energy vehicles and digital empowerment to continue to promote breakthroughs in key core technologies and create specialized new products. It is expected that the company's revenue and profit will maintain rapid growth and improve profitability. Therefore, the buy rating is maintained.
Risk warning: Industry demand is weak, PTC technology is being replaced, overseas market expansion of optical modules falls short of expectations, etc.