Incident: On April 17, the company released its 2023 annual report. In 2023, the company achieved revenue of 499 million yuan, +31.03%; net profit to mother of 0.17 million yuan, or -41.50% year-on-year; net profit after deducting non-return to mother of 007 million yuan, or -47.47% year-on-year.
New virtual reality products contribute a lot to revenue, and increased investment affects short-term profits. In 2023, the company's revenue grew rapidly, mainly because the company continued to enrich its product range. The introduction of new products continued to contribute new momentum to revenue. In particular, newly launched virtual reality products contributed greatly to the company's revenue. By product, in 2023, the company's professional audition products/virtual reality products/ancillary products achieved revenue of 3.59/0.75/ 0.62 billion yuan respectively, +3.85%/+100%/+99.25% year-on-year. Profits are under pressure, mainly due to the company's forward-looking layout of new products, new tracks, and increased investment in new businesses. On the one hand, the company's self-developed chips are in the late stages, and investment in design services, streaming fees, and packaging costs have increased, and the continuous expansion of new products has also caused the company's R&D expenses to increase year by year; on the other hand, the introduction and marketing of new products has led to a year-on-year increase in the company's sales expenses; in addition, the shareholding plan and stock options granted to employees in May 2023 increased year-on-year.
Pioneering a new field of artificial intelligence, continued growth can be expected. Based on existing audio and video display control technology, the company has created a Plato AI intelligent recognition management system. Through AI, it can improve the intelligence of unmanned inspection and unmanned duty, and can achieve various functions such as fault analysis, remote forensics, remote abnormal alarm, etc., effectively improving operation and maintenance efficiency and greatly reducing human inspection intensity. Furthermore, the company has actively developed overseas business and achieved breakthrough progress, and has established a business partnership with N Company, an internationally renowned leader in graphics technology and artificial intelligence computing. Currently connected products include liquid cooling test platforms and AI-based testing The company has obtained a qualified supplier code from Company N for platforms, various test boards, etc., and is expected to directly supply and continue to expand new business.
Gross margin was under pressure, and operating cash flow increased year over year. In 2023, the company's gross margin was 43.52%, -8.1pct year on year. The gross margin was under pressure, mainly due to the low upfront gross margin of newly launched virtual reality products. By product, in 2023, the gross margin of virtual reality products was 17.75%; while the gross margin of professional audition products was relatively stable, 52.25%, -0.2 pct year on year; the gross margin of ancillary products was 25.44%, -17.77pct year on year. On the cost side, in 2023, the company's expenditure rate for the period was 42.92%, -6.21pct. The total cost of the company during the period was 214 million yuan, +14.49%. Among them, sales/management/ financial/ R&D expenses were 0.73/0.45/ 0.15/081 million yuan, respectively, up 19.97%/12.50%/6.72%/12.48% year-on-year, respectively. Furthermore, as the company strengthened repayment controls, the company achieved a net cash flow of 120 million yuan from operating activities in 2023, +198.22% over the same period last year.
Self-developed chips are progressing smoothly, further enhancing the company's competitiveness. The company insists on independent research and development, and continues to incubate and invest in professional chips in the audio and video field. According to the company's official account, on April 17, 2024, the company released three chips: Hanshuo, Zeus, and Thor. Among them, the “Coollights Hanshuo LDV4045 chip” is the world's first LED integrated chip, leaving the traditional era of using sender/receiver cards, network cables, and high power consumption, and has a wider range of usage scenarios; the “Zeus Zeus Zeus 0108 chip” is the first autonomous and controllable professional audio and video processing ASIC chip in China. It better meets the diverse product needs and autonomous controllable needs of customers in key industries; the “Thor Thor ULC32A chip” is a human-computer interactive display chip that can be used in industrial control, beauty equipment, medical devices, charging piles, smart homes, etc. We believe that the company has gained a first-mover advantage in the field of audio and video professional chips, and that subsequent introduction of chips will help improve the company's competitiveness and profitability, bring new growth, and help the company's long-term sustainable development.
Lay out a new virtual reality circuit, and the fields of products and applications continue to expand. In addition to traditional professional audition products, the company is actively expanding new tracks. Relying on years of technology accumulation, the company has broken through core technologies such as next-generation XR digital interaction and augmented reality (AR), which can enable the integration of new scenarios such as image rendering and perceptual interaction.
According to the company's 2023 annual report, in 2023, the company launched the Xshadow AR projection control system, Pandora immersive interactive system, Medusa spatial positioning processing system, and integrated media audio and video system. Related products won the Metaverse VR/AR/MR/XR Leading Enterprise and Outstanding Hardware Award, Metaverse Interactive Technology and Outstanding Digital Device Product Awards at the 2nd World Metaverse Ecological Expo.
Profit forecast and investment rating: The company's net profit for 2024-2026 is estimated to be 1.90/3.04 billion yuan, respectively. The current stock price corresponds to PE of 33/20/14 times, respectively, to maintain a “buy” rating.
Risk warning: Customer growth falls short of expectations, downstream demand falls short of expectations, risk of fluctuations in raw material prices, risk of macroeconomic fluctuations.