1Q24: Continuing the recovery trend, inventory levels declined further
1Q24 achieved revenue of 319 million yuan (yoy: +10.33%, qoq: -15.55%) and net profit of 31 million yuan (yoy: -8.83%, qoq: -64.07%). Among them, government subsidies declined year-on-year, and net profit after deducting non-return to mother was 0.29 million yuan (yoy: +40.94%, qoq: +14.52%). The first quarter was a traditional low season, and the company's revenue declined month-on-month, but thanks to the recovery in demand for smart home appliances and lithium battery management chips in the mobile phone market, 1Q24 revenue achieved year-on-year growth. Due to intense market competition, the prices of some products of 1Q24 have been lowered, leading to a further decline in gross margin, but it is expected that it has basically bottomed out.
Market demand is expected to recover in 24. As OEM costs decline, 2H24's gross margin is expected to improve, maintaining the 24/25/26 net profit forecast of 1.9/2.86/413 million yuan. Considering the recovery in demand for smart home appliances and the subsequent release of new products, 44 times 24PE (Wind comparable companies agree to expect 40x24PE), and the target price is 24.6 yuan, maintaining the “buy” rating.
1Q24 review: Demand in the home appliance and BMIC market is picking up, and short-term gross margin is still under pressure. Market demand for 1Q24 smart home appliances and lithium battery management chips continues the recovery trend since 4Q23. Demand in the AMOLED display driver chip repair market is still weak, the company's overall revenue has increased year-on-year, and 2Q24 revenue is expected to increase. In terms of gross margin, due to intense market competition, sales prices of some of the company's products are under pressure, and the company is still digesting high-priced inventory in the early stages. 1Q24 gross margin fell further by 0.66 pct to 33.85% (yoy: -5.0 pct) month-on-month. However, the company has actively negotiated with the foundry. It is expected that the 2H24 cost side will gradually improve, the price of superimposed products will basically stabilize, and gross margin will improve in the second half of the year. In terms of inventory, as of the end of 1Q24, the company's inventory was 689 million yuan, a decrease of 121 million yuan from the end of 4Q23. The company's production control effect was evident. Inventory declined for two consecutive quarters. Against the backdrop of a recovery in market demand, the company expects that the 24-year cumulative inventory will gradually be digested.
2024 outlook: Demand for terminals is picking up. Focus on the outlook for AMOLED Driver brand phones in 24 years. Demand for smart home appliances and other terminal markets will continue to pick up. On the basis of consolidating the competitive advantage of the original market, the company is actively launching new products to expand growth space, and annual revenue is expected to achieve double-digit growth.
Specifically: 1) MCU: The market share of major smart inverter appliances continues to increase, and industry-grade MCUs are further expanded in the fields of industry, robotics, etc., and automotive-grade MCU continues to be introduced into new projects, and the first WiFi/BLE Combo MCU has entered the marketing stage; 2) BMIC: Lithium battery management chips are expected to further introduce new customers on the basis of the resumption of growth among some mobile phone brand customers, and launch next-generation notebook BMIC products to meet domestic replacement needs; 3) DDIC: Actively promote the new generation of AMOLED drivers in screen factories With the verification, introduction and increase of brand mobile phone customers, 2H24 is expected to start contributing to revenue.
Investment advice: The target price is 24.6 yuan, maintaining the “buy” rating. Market demand is expected to continue to recover in 2024, and the decline in upstream costs will bring a positive contribution to the company's gross margin in the second half of the year. We maintain the 24/25/26 net profit forecast of 1.9/286/413 million yuan, giving 44x 24PE (40x the average of comparable companies) and a target price of 24.6 yuan to maintain the “buy” rating.
Risk warning: Demand recovery falls short of expectations, introduction of new products falls short of expectations, and increased competition has led to a decline in share.