Matters:
On April 19, the company released its 2023 annual report and 2024 quarterly report. In 2023, the company achieved revenue of 5.761 billion yuan, -29.14% year-on-year, and realized net profit of 161 million yuan, or -92.15% year-on-year. Looking at the first quarter of 2024, the company achieved revenue of 1,627 million yuan, +21.32% year on year, and realized net profit of 205 million yuan to mother, +36.45% year over year. Based on factors such as the company's strategic development plan, the company's current business situation, and future development capital requirements, the company will not distribute profits in 2023.
Ping An's point of view:
The consumer market bottomed out and the 24Q1 performance improved markedly. In 2023, due to sluggish demand in the terminal market and fierce competition among peers, product prices dropped significantly, putting pressure on the company's overall performance in 2023. In 2023, the company achieved revenue of 5.761 billion yuan, -29.14%, and net profit to mother of 161 million yuan, -92.15% year-on-year. Gross margin and net margin fell to 34.42% and 2.8%, respectively.
As the consumer market gradually picked up, the prices of several product lines in 23Q4 began to rebound. 24Q1 achieved revenue of 1,627 million yuan, +21.32% year over year, and realized net profit of 205 million yuan, +36.45% year over year. Gross margin fell slightly to 38.16% year over year, and net margin was +1.39pct to 12.58% year over year.
Memory: Shipments continue to grow, and product prices have bottomed out and stabilized. 1) NOR Flash: The company is the second-largest NOR Flash company in the world. The product capacity covers 512Kb-2Gb. Currently, the company's full range of 55nm process node products have been mass-produced. In 2023, the company's NOR Flash shipments reached a new high, +16% to 2,533 billion units, and the cumulative shipment volume by the end of 2023 exceeded 21.2 billion units.
The company will continue to maintain its advantages in the consumer market, especially in the middle and high-end consumer markets, while actively expanding application fields in the industrial, Netcom, automotive and other markets. 2) NAND Flash: Currently, the company's NAND products have achieved full mass production with the 38nm/24nm process, and the capacity covers 1Gb-8Gb. Among them, shipments of SLC NAND Flash products achieved a significant year-on-year increase in 2023, while SPI NAND Flash has achieved full product coverage in the fields of consumer electronics, industry, automotive electronics, etc. 3) DRAM: The company is actively entering the DRAM memory niche market (consumption, industrial control, etc.) and is launching products such as DDR4 and DDR3L. Related products have achieved good revenue in the fields of consumer electronics, industry, network communication, etc. In addition, the company's transactions with Changxin Storage reached 362 million yuan in 2023, which is expected to grow to 852 million yuan for the full year of 2024.
MCU: The product matrix continued to improve, and business revenue gradually stabilized in 23Q4. As the number one MCU supplier in China, the company has mass-produced 46 product lines and can provide more than 600 MCU products. The product core covers ARM? Cortex? -M3, M4, M23, M33, and M7. At the same time, the company also launched and mass-produced the world's first 32-bit general-purpose MCU product based on the RISC-V core. Judging from the revenue level, due to the low overall demand for MCU in 2023, the company's MCU revenue declined markedly in the first half of the year, but gradually stabilized in 23Q4. By the end of 2023, the company had shipped more than 1.5 billion MCU products. Among them, the company has successfully cooperated with leading domestic Tier1 platforms and a number of leading international companies in terms of automotive MCUs. The market expansion of the company's GD32A503 series products is progressing steadily, and new high-performance GD32A490 series products have been launched. In addition, the company's new dual-band dual-mode wireless MCU GD32VW553 series products based on the RISC-V core were also officially shipped in batches, and can be widely used in various wireless connection scenarios such as smart home appliances, industrial Internet, and communication gateways.
Investment advice: Based on the company's latest financial report and judgment on changes in industry demand, we lowered the company's profit forecast. The company's net profit for 2024-2026 is estimated to be 987 million yuan (previous value was 1,242 million yuan), 1,232 billion yuan (previous value was 1.804 billion yuan), and 1,456 billion yuan (new), respectively. The PE corresponding to the closing price on April 22 is 51.3X, 41.1X, and 34.8X, respectively. In 2023, due to the company's main business strategy of increasing sales volume and market share, and the semiconductor downturn cycle, overall business performance is under pressure, but considering the continued recovery in current consumer market demand and the gradual stabilization of related product prices, the company, as a domestic NOR Flash+MCU double leader, has strong product competitiveness and leading market position, and is expected to usher in a rapid recovery in performance when the industry recovers, thus maintaining the company's “recommended” rating.
Risk warning: 1) Macro environment and industry fluctuation risk. The semiconductor industry faces global competition and cooperation, and is affected by macroenvironmental factors such as domestic and foreign macroeconomics, industry regulations, and international trade frictions. If the company fails to adjust customer and product structures in a timely manner, it may adversely affect the company's performance; 2) Supply chain risks. The company's product characteristics are suitable for adopting a fabric-free operation model. There is an uncertain risk of whether production capacity in all parts of the supply chain, such as wafer foundries and packaging testing plants, can guarantee procurement needs and reasonable costs. 3) Exchange profit and loss risk. The company accounts for a relatively high share of overseas sales, and is mainly settled in US dollars. Large fluctuations in exchange rates may bring exchange risks to the company's operations.