Description of the event
The company released an annual report for 2023 and a quarterly report for 2014, as well as a performance outlook for the first half of the year. The company's revenue in 2023 was 231.905 billion yuan, +8.35% YoY, and net profit to mother was 10.953 billion yuan, +19.53% YoY. Revenue for the first quarter of '24 was $52.407 billion, +4.93% YoY, and net profit to mother was 2,471 billion yuan, +22.45% YoY. The company expects net profit to mother for the first half of 2024, up 20-25% year-on-year, corresponding to net profit of 27.56-2,974 billion yuan in the second quarter of 2024, an increase of 17.9%-27.2% year-on-year.
Incident reviews
Consumer electronics is growing steadily, and the product line continues to be rich. The company relies on long-term experience in the consumer electronics industry to form integrated capabilities from components and modules to complete machines. Along with the continuous emergence of new technologies such as AI and XR, the company continues to innovate a richer and more intelligent product portfolio. In particular, the further application of AI technology in mobile phones, PCs, and wearables in the future will once again open up industry space. The “process+underlying technology” ability circle built by the company enables the company to continuously extend its capabilities to new fields to ensure that the company can maintain its leading position in the industry for a long time.
New businesses such as communications and automobiles are growing rapidly, opening up a new growth curve. The company's revenue in the communications and automotive business in 2023 was 14.538/9.252 billion yuan respectively, up 13.28%/50.46% year-on-year. The communications business continues to cultivate products such as electrical connectivity, optical connectivity, heat dissipation, power management, radio frequency, etc., and has gradually formed a complete product matrix. In the data center high-speed interconnection industry, the company has jointly formulated next-generation high-speed connection industry standards such as 800G and 1.6T with leading international data center manufacturers. It has obvious technical advantages in the fields of high-speed copper cables, cables, etc., and is gradually promoting more communication product lines to customer supply chains. The automotive business relies on the technical experience accumulated by consumer electronics, while maintaining deep cooperation with leading domestic and foreign car brand customers to transfer capabilities in the consumer electronics field to the automotive industry. Currently, it has formed four major business lines: automotive wiring harness/connectors, smart cockpit, body electronics, and power management, and is actively expanding customers in various fields.
The 24-year guide has maintained steady growth. Based on industry recovery, AI intelligence trends drive the company's long-term growth. The company anticipates net profit to mother for the first half of 2024 of $52.27 to 545 billion yuan, an increase of 20-25% over the previous year, corresponding to net profit of 27.56-2,974 billion yuan in the second quarter of 2024, an increase of 17.9%-27.2% over the previous year. The company's main business, the consumer electronics industry, has experienced 23 years of industry decline and is expected to recover steadily in 24 years. AI has brought about rapid growth in the data center industry, and the automotive electronics industry brought about by intelligent new energy vehicles is also growing at a high rate. The company's three major businesses, consumer electronics, communications, and automobiles, are currently on an upward trend, while the AI trend is opening up room for long-term growth.
Investment advice
The company's 2024-2026 revenue is expected to be 2829.25/3429.34/413.329 billion yuan, up 22.0%/21.2%/20.5% year on year. The company's net profit to mother is estimated to be 142.72/165.48/20.210 billion yuan, up 30.3%/15.9%/22.1% year on year, corresponding EPS is 1.99/2.31/2.82 yuan, PE is 14.4/12.4/10.1 times. Considering the company's leading position in the consumer electronics industry, while also laying out emerging industries such as new energy vehicles and servers, the coverage was given a “buy-A” rating for the first time.
Risk warning
Risk of macroeconomic fluctuations: The international and domestic economies are facing challenges. The company's downstream demand mainly comes from consumer electronics. Terminal demand is highly related to the economy, and there is a risk of being affected by the macroeconomy.
International trade friction causes supply chain risks: The company's downstream customers account for a high proportion of overseas customers, and there is a potential risk that the supply chain will be blocked due to international politics.
Industry competition increases risk: The downstream products of the company are mainly consumer electronics, automotive electronics, data centers, etc. The company operates many competitors in the ODM business model, and there is a risk that its market share will decline.
Customer innovation falls short of expectations: The company's growth mainly comes from the amount of added value brought about by innovation in downstream brand customer products. Technological innovation is uncertain, and if innovation falls short of expectations, there is a risk that the growth rate will slow down.