Net profit after deduction in 1Q24 increased 22% year-on-year to maintain purchases
The company disclosed its 2024 quarterly report. 1Q2024 achieved total operating income of 4.106 billion yuan, +11.14% year over year, net profit to mother of 415 million yuan, +8.25% year over year, and net profit after deduction of +22% year-on-year (in line with the previous performance forecast range). We maintain our 24-26 EPS forecast of 0.46, 0.53, and 0.59 yuan. As of 2024/4/25, Wind is comparable to the company's average PE of 14x in 2024. Considering the two-wheel drive of the company's multimedia business and LED business, we continue to consolidate our advantages in LED chips and COB display business, increase market share and contribute to profit growth, give the company a 2024 15xPE valuation, maintain a target price of 6.90 yuan, and maintain a “buy” rating.
Stable TV business, mini LED COB direct display volume
The company's 1Q24 revenue performance was positive. We think it mainly comes from two aspects: 1) Although TV OEM orders have weakened (according to Lotu data, the company's 1Q OEM volume fell by about 15.5% year on year), benefiting from a recovery in panel prices, OEM revenue or relative stability; 2) In the LED industry chain business, the company's Mini LED COB directly showed accelerated business release, with revenue of 295 million yuan in a single quarter, a year-on-year increase, and considering that the company's production capacity reached 16,000 square meters/.25 point spacing estimates in April 24), it is still being invested in new production In the process of being able to expand point spacing coverage, various application scenarios continue to emerge as the company drastically cuts costs. We expect Mini LED COB to directly contribute positively to business growth in '24.
Gross profit margin declined slightly year over year
Due to the concentrated release of overseas orders in the same period last year, the gross margin base was high. The company's gross margin for 1Q2024 was 17.78%, -0.55pct year on year.
Cost rate decline, mainly affected by exchange rate fluctuations
The overall cost ratio of the 1Q2024 company was -0.62 pct year on year, of which the financial expense ratio was -0.64 pct year over year (mainly due to fluctuations in foreign currency exchange rates). At the same time, income tax expenses increased by 24.024,800 yuan over the same period last year, mainly due to the company's recoverable losses and deduction of income tax expenses during the same period last year.
TV OEM is expected to recover. The overall revenue structure or optimization of the LED industry takes into account the recovery in overseas TV demand and the recovery in TV panel prices. We are optimistic that the company's TV OEM business will usher in a recovery in volume and price in the following months. However, in the company's LED business, the LED chip and packaging business is actively adjusting the product structure and expanding the Mini LED backlight business, and profits are expected to be optimized. Mini LEDCOB clearly shows that under the advantages of scale and cost, the market share is expected to continue to be concentrated in the company, and the contribution to revenue and net profit may be quite active.
Risk warning: ODM market competition intensifies; LED demand is declining.