Incident: Recently, the company released its 2023 annual report and report for the first quarter of 2024. In 2023, the company achieved revenue of 5.761 billion yuan, -29.14%; net profit due to mother was 161 million yuan, -92.15%; net profit after deducting non-return to mother was 0.27 billion yuan, -98.57% year on year; in the first quarter of 2024, the company achieved revenue of 1,627 million yuan, +21.32%, +19.10% month-on-month; net profit to mother of 205 million yuan, +36.45% year-on-year, +175.14% Net profit attributable to mother was 184 million yuan, up +41.26% year over year, and +158.68% month on month.
Key points of investment:
24Q1 results recovered strongly, and profitability improved markedly. Benefiting from the recovery in consumer market demand and the increase in the market share of the company's products, the company's 24Q1 revenue and net profit to mother resumed rapid growth. Due to factors such as increased competitiveness of the company's products and changes in product structure, the company achieved gross margin of 38.16% in 24Q1, down 0.09% year on year, and up 3.62% month on month; the company's 24Q1 net interest rate was 12.58%, up 1.39% year on year, turning a loss into a profit month on month. The company has always attached great importance to R&D team building and maintained a high level of R&D investment. In 2023, the company's R&D investment reached 1,067 billion yuan, accounting for about 18.52% of revenue, and the company's technical personnel accounted for about 73.5%.
The introduction of a stock option incentive plan to motivate executives and key personnel, demonstrating the company's confidence in future development. The company announced the 2024 stock option incentive plan (draft). The incentive plan is to grant 6.7814 million stock options, accounting for 1.02% of the company's total share capital. The total number of incentive recipients is 45 people, mainly company directors, senior managers, managers, and core key personnel working for the company or its holding subsidiaries. The exercise price is 59.18 yuan per share. The performance assessment target of this incentive plan is based on 2023 revenue. The company's revenue in 2024-2027 is not less than 72.94/86.20/98.00/1180 billion yuan, with a year-on-year growth rate of 26.61%/18.18%/13.69%/20.41%, and a compound growth rate of 19.63% in 2024-2027.
Memory products continue to enrich their product line and increase their market share, which is expected to benefit from a recovery in the storage cycle. The company's memory products are divided into NOR Flash, SLC Nand Flash, and DRAM. In terms of NOR Flash products, the company ranked second in the world in terms of market share, with shipments reaching 2,533 billion units in 2023, an increase of 16.15% over the previous year. In 2024, the company's NorFlash products continued to iterate on new processes and expand high-reliability products and low-power consumption products; in SLC NAND Flash products, shipments in 2023 achieved a significant year-on-year increase, and will continue to increase the proportion of 24nm process products and enhance product competitiveness; in terms of DRAM products, the company in 2023 DDR3 4Gb and 2Gb products have been launched, and large-scale mass production has been achieved, and mass production will be achieved in 2024. The company plans to launch DDR4 8Gb products in 2024, and will continue to develop LPDDR4 products in the future. It is expected that in 2025, the company's DRAM products will cover the needs of major niche markets and achieve mass production and supply. Against the backdrop of steady demand for smartphones and PCs, compounding AI trends, the storage market is expected to grow 66.3% in 2024, according to Gartner data. The company's memory products continue to enrich its product line and increase its market share. The recovery in demand and prices for mainstream storage products will drive the recovery of the company's niche DRAM and SLC NAND products, and the company is expected to benefit from a recovery in the memory cycle.
The MCU business has gradually stabilized, and the automotive-grade MCU market is expanding smoothly. Demand for MCU products remained low in 2023, industry competition intensified, and product prices continued to decline; 23H1's MCU revenue declined sharply, the 23H2 decline gradually narrowed, and 23Q4 showed signs of stabilization compared to 23Q3. In 2023, the company officially launched the first GD32H series ultra-high performance microcontroller based on the Arm Cortex-M7 core in China; in terms of automotive-grade products, the market expansion of the GD32A503 series automotive-grade MCU products progressed steadily in 2023, and further launched the new GD32A490 series high-performance vehicle-grade MCU products. Currently, the company has successfully cooperated with leading domestic Tier 1 platforms to develop products, such as Ettec body control areas, Baolong Technology tire pressure monitoring systems, and has also cooperated with many international leaders The company cooperates. The company has now successfully mass-produced more than 600 MCU products, and will continue to enrich its product line and continue to evolve its position as an “MCU department store”.
Profit forecasting and investment advice. The company is a leading domestic memory and MCU company. It is expected that the memory market will resume growth in 2024. The company's memory products will continue to enrich its product line and increase its market share, and is expected to benefit from the recovery of the memory cycle. The company's MCU business has stabilized and is expected to resume growth in 2024. We expect the company's 24-26 revenue to be 73.19/90.33/10.648 billion yuan, and the corresponding EPS for 24-26 is 1,027/14.72/1,838 billion yuan, and the corresponding EPS is 1.54/2.21/ 2.76 yuan, corresponding PE is 49.32/34.41/27.56 times, maintaining the “buy” rating.
Risk warning: Industry competition increases risk; downstream demand recovery falls short of expected risk; new product development progress falls short of expected risk; new product market expansion falls short of expected risk.