Incidents:
On April 19, the company released its 2023 annual report. In 2023, it achieved operating income of 7.565 billion yuan, 6.26% year-on-year, net profit to mother of 2,531 billion yuan, -3.84% year-on-year, and a gross profit margin of 61.19%. The fourth quarter of 2023 achieved revenue of 19.23 billion yuan, -11.94% year-on-year, and a gross profit margin of 53.48% in Q4.
Maintain a high level of R&D investment and continue to deepen the layout of the three product lines:
The company includes three product lines: integrated circuits, smart cards, and quartz crystals. In 2023, integrated circuit business revenue was 4.487 billion yuan, -5% year-on-year, accounting for 59.32%; smart card chips were 2,842 million yuan, +36.6% year-on-year, accounting for 37.57%; and quartz crystals were 185 million yuan, or -35.5% year-on-year, accounting for 2.45%. The annual R&D investment was 1,633 billion yuan, an increase of 30.68% over the previous year, accounting for 21.58% of revenue. In terms of special circuits, new industrial-grade product lines and irradiation-resistant product lines have been launched; new products such as special memories, special special processors, special FPGAs, and system-level chips are progressing smoothly; analog products have developed more new products and deepened the layout of analog product systems; conquer low ripple switching power supply control technology and break through key technologies in special Ethernet switching circuit design.
In terms of smart safety chips, we established a vehicle product development and management process system that conforms to the “ASIL D” level of automotive functional safety; developed Strongbox with Intel to help the Celadon platform improve safety application capabilities by integrating the THD89 security chip; and released the world's first eSIM solution specially customized for smart POS. In the crystal business, small-sized, high-base frequency products were promoted. TSX Crystal and OSC1612 products were successfully developed; OSC differential ultra-high fundamental frequency products based on Q-MEMS were mass-produced.
Multiple measures have been taken to maintain a stable gross margin, and product systems such as FPGA, special storage, and simulation continue to be rich:
According to Wind investor research notes, prices for some special integrated circuit products have been reduced to a certain extent. The company effectively addresses the negative impact of price cuts on the overall gross margin of some products through measures such as introducing high value-added products, controlling supply chain costs, improving production efficiency, and improving product yield. On the FPGA side, it continues to maintain its leading position in the industry market, and the range of users continues to expand, and the new generation of higher performance products have been recognized by some core customers; in the field of special memory, the newly developed special Nand Flash has been launched; network and interface products continue to upgrade the existing series of products and launch three new products; special SoPC platform products have been widely recognized by users, and fourth-generation products have completed early program promotion and can be applied in many fields; in the field of analog products, analog-to-digital converters, isolation devices, and high-performance clocks We continue to launch a variety of new products in seven directions, including switching power supplies, linear power supplies, monitoring circuits, and protective devices.
Investment advice:
We expect the company's revenue from 2024 to 2026 to be 8.473 billion yuan, 9.575 billion yuan, and 10.532 billion yuan, respectively, and net profit to mother will be 2,513 billion yuan, 3.175 billion yuan, and 3.786 billion yuan respectively, corresponding to PE 20 times, 16 times, and 13 times, respectively. Using the PE valuation method, considering the growth of the company's new products, profitability is expected to continue to increase steadily in 24 to 25 years. It will be given 30 times PE in 2024, corresponding to a target price of 88.7 yuan, maintaining a “buy-A” investment rating.
Risk warning: Market demand falls short of expectations; new product launches fall short of expectations.