Short-term pressure on 2023 results, 1Q24 revenue side picked up year-on-year
According to the company's 2023 annual report, the company's revenue in 2023 was 2.15 billion yuan, down 6.9% year on year; net profit to mother was 60 billion yuan, down 49.5% year on year. The decline in net profit exceeding the decline in revenue was mainly due to the increase in the company's R&D and sales investment intensity, which put pressure on profit levels. According to the company's 2024 quarterly report, 1Q24's revenue was 570 million yuan, up 29.7% year on year; net profit to mother was 0.1 billion yuan, down 64.3% year on year. The year-on-year decline in performance was mainly due to fluctuations in profitability. Considering the short-term pressure on the company's gross margin, we expect the company's net profit from 2024 to 2026 to be 1.20/1.71/2.19 (previous value: 1.58/2.29/-) billion yuan, respectively. Comparable to the company's 2024 Wind consensus, the average PE value is 41x. Based on the company's leading position in smart modules, computing power modules, etc., the corresponding target price is 23.88 yuan (previous value: 31.52 yuan), maintaining the “gain” rating.
Automotive business continues to grow in 2023; revenue picks up in 1Q24
According to the company's 2023 annual report, by sector, the company's 5G smart cockpit modules to core in-vehicle customers continued to be shipped in large quantities, and the revenue share of the intelligent connected vehicle business continued to rise; the revenue share of the traditional IoT industry remained relatively stable; and the FWA sector declined due to changes in existing customer structure and demand. By region, the company's overseas business revenue in 2023 was 660 million yuan, up 20.3% year on year; domestic revenue was 1.49 billion yuan, down 15.3% year on year. According to the company's 2024 quarterly report, the company's three major fields of intelligent connected vehicles, FWA, and IoT all showed a recovery trend in demand, and overseas customer demand for FWA and IoT is strong. 1Q24's overseas revenue was 230 million yuan, up 53.7% year on year, and the revenue growth rate accelerated; domestic revenue was 350 million yuan, up 17.6% year on year, and domestic revenue returned to the growth trajectory.
1Q24 Comprehensive gross margin is under pressure, and cost control is good
In 2023, the company's comprehensive gross margin was 19.2%, up 1.3 pct year on year, mainly due to an increase in the share of high-margin product shipments; the 1Q24 company's comprehensive gross margin was 15.7%, down 6.9pct year on year, mainly due to the impact of the company's shipping structure: some products with lower gross profit levels were concentrated during the reporting period, which gradually lowered the overall gross margin level; at the same time, the company's shipments of products related to intelligent connected vehicles increased, and gross margin decreased compared to the same period last year. The cost side of the 1Q24 company was well controlled. The sales/management/R&D expenses ratio was 2.3%/2.2%/8.4%, respectively, down 0.6/0.7/1.5pct year on year.
Smart modules and computing power modules continue to break through, and are expected to enjoy AI development opportunities in the future. According to the company's 2023 annual report, the company continues to increase investment in 5G smart cockpits, 5G vehicle-grade modules, 5G smart T-Box, and high-computing power AI modules. On the market side, the company has increased its focus on developing terminal car manufacturers, leading Tier 1, drones, servers and overseas customers, and has increased the application promotion of generative AI in various fields. We believe that in the future, as edge computing application scenarios open up, it is expected to contribute new performance growth points to the company.
Risk warning: Competition in the IoT module industry is intensifying, and customer development progress falls short of expectations.