Brief performance review
On April 24, 2024, the company released its 2023 annual report and 2024 quarterly report.
1) In 2023, the company achieved revenue of 1,037 billion yuan, an increase of 35.17% over the previous year; net profit to mother was -20 million yuan, compared to -29 billion yuan in the same period last year, and losses narrowed.
2) 2023Q4 achieved revenue of 160 million yuan, a year-on-year decrease of 25.45% and a month-on-month decline of 31.55%; realized net profit to mother of -63 million yuan, a year-on-year decrease of 120.31%.
3) 2024Q1 achieved revenue of 255 million yuan, a year-on-year decrease of 13.61% and a month-on-month increase of 58.80%; realized net profit to mother of -0.06 million yuan, compared to 16 million yuan in the same period last year.
Management analysis
The business breakdown and analysis is as follows:
1) Revenue side: In '23, the company achieved revenue of 1,037 billion yuan, an increase of 35.17%, but the annual revenue distribution showed a trend of high and low. At the same time, 24Q1 achieved revenue of 255 million yuan, a year-on-year decline but a month-on-month improvement. The high and low revenue in '23 and the decline in revenue in 24Q1 were due to some downstream customers increasing their pick-up efforts in the first half of '23 due to concerns about uncertainties in production capacity supply. As a result, 23H1's revenue was greater than 23H2, and the high base of 23Q1 led to a year-on-year decline in 24Q1. As the company's product delivery capacity was continuously verified, supply uncertainty was gradually eliminated, and abnormal revenue fluctuations were gradually eliminated starting in '24.
2) Profit side: Net profit returned to mother in '23 was -20 billion yuan, down 33.62% from the same period last year. Net profit attributable to mother for 24Q1 was -06 billion yuan, a loss compared to the same period last year.
Although the company's revenue has grown significantly, there is still a gap between the company and leading overseas chip exchange manufacturers in terms of product richness and product performance. The company is still in a development stage with high R&D investment. Coupled with changes in product sales structure and fluctuations in the gross margin of some products, the company is still in a state of loss, but the margin of loss has narrowed.
3) Cost side: The company's R&D expenses in '23 were 314 million yuan, an increase of 19% over the previous year, accounting for 30.28% of R&D expenses. The company continues to invest heavily in R&D and continuously promotes product iteration and upgrading. The new product for large-scale data centers and cloud services has been sent to customers for sample testing by the end of 23 as planned. The product supports a maximum port rate of 800G.
Profit Forecasts, Valuations, and Ratings
We expect revenue for 24-26 to be 13.72/17.79/2,288 billion yuan, net profit to mother of 0.04/0.27/56 million yuan, corresponding EPS of 0.01/0.07/0.14 yuan, and continue to maintain the “buy” rating.
Risk warning
The risk that the company has no actual controller; the risk that financial investors will reduce their holdings; the risk that mass production of switching chips will not be as good as expected; the risk that downstream demand will fall short of expectations.