The 23-year performance declined sharply due to the impact of industry sentiment, and the 23Q4 performance improved significantly: according to the company's 23-year performance forecast, net profit to the mother is expected to be 262 million yuan to 332 million yuan in 23, a year-on-year decrease of 70%-62%; net profit after deduction of 186 million to 255 million yuan, a year-on-year decrease of 78%-70%. The pressure on the company's 23-year performance is mainly due to the fact that overall global semiconductor demand is still sluggish. According to statistics from China's General Administration of Customs, China imported 481.2 billion integrated circuits in 2023, with an import value of US$351 billion, a year-on-year decrease of 10.7% and 15.7%, respectively. Looking at the Q4 quarter of '23, net profit to mother was achieved of 120—190 million yuan; net profit after deduction was 92 million to 162 million yuan, a significant improvement over the previous month, mainly due to a recovery in downstream consumer electronics demand.
The consumer electronics market is gradually recovering, and the communications and industrial control markets are still waiting to recover: the company's downstream application fields are mainly divided into consumer electronics and pan-industry. In '23, H1 each accounted for about 50% of revenue. Among them, mobile phones accounted for about 17%, and non-mobile consumer electronics accounted for about 32%. Demand for consumer electronics has gradually picked up since '23, especially in the second half of the year.
According to IDC data, global smartphone shipments increased 7.8% year over year to 289.4 million units in Q1 in '24; Q4 and Q3 increased 8.5% year over year and declined 0.1%, respectively. Looking ahead to H1 in '24, benefiting from the active procurement of major downstream customers and the expansion of the company's product matrix, we expect the company's performance to continue in the off-season. The current boom in industrial control and communications markets is still under pressure. Currently, industrial control customers are generally making inventory adjustments, and it is expected that H2 will return to a normal growth pattern by '24.
Leading domestic simulation platform, continuing to expand new material numbers: as of '23, H1 can sell a total of more than 4,600 products in 30 categories. During H23, the company launched more than 300 new products with completely independent intellectual property rights, including high-precision voltage benchmarks, high-speed low-side gate drivers with negative input voltage capabilities, high-efficiency synchronous step-down chips, high-isolation high-bandwidth dual-channel differential analog switches, bidirectional charge pumps, DC-DC step-down chips based on the self-developed AHP-COT-FB architecture, and four-channel AMOLED screen power supply chips. As of mid-2023, the company had 909 R&D personnel and 311 people with ten years or more of experience in integrated circuits, accounting for 34%. The new products developed are gradually showing a trend of multifunctionality, high-end, and complexity. We believe that the company is already in a leading position in the country in terms of the number of materials. In the future, as early R&D investment gradually enters the monetization period and the downstream boom picks up, it is expected to start a new round of growth.
Profit forecast, valuation and rating: Considering the company's 23-year performance forecast and the downstream boom in industrial control, communications, etc., the 23-25 net profit forecast was lowered from 791 million/1,067 million/1,331 million yuan to 313 million/602 million/825 million yuan, with adjustments of -60%/-44%/-38%, and the corresponding PE for 23-25 years was 101/52/38X, respectively. We are optimistic about the company's development potential as a leader in platform-based analog chips, but considering the company's short-term performance pressure, inventory level, and industry competition pattern, it maintains an “gain” rating.
Risk warning: The industry competition pattern deteriorated beyond expectations; new product development fell short of expectations; downstream market demand recovery fell short of expectations.