1Q24 revenue and net profit after deducting non-return to mother both hit record quarterly highs. In 2023, the company achieved revenue of 3.129 billion yuan (YoY +5.4%), net profit attributable to mother of 356 million yuan (YoY -19.6%) and net profit of 348 million yuan (YoY +19.7%); of these, 4Q23 achieved revenue of 924 million yuan (YoY +22.4%, QoQ +10.1%) and net profit of 109 million yuan (YoY +254.5%, QoQ -11.0%). 1Q24 achieved revenue of 1.04 billion yuan (YoY +68.8%, QoQ +12.5%), net profit to mother of 162 million yuan (YoY +244.4%, QoQ +48.8%), and net profit after deducting non-return to mother of 151 million yuan (YoY +252.1%, QoQ +34.8%). We believe that the company's rapid growth in 1Q24 is mainly due to the overall recovery of the Android industry chain and the rapid growth of the automotive connector business.
R&D expenses have increased a lot, and the company has deployed AI-related high-frequency and high-speed connectors. In 2023, the company's R&D rate was 9.47%, up 0.55pct year on year. 1Q24 invested 113 million yuan in R&D expenses, an increase of 69.67% year on year. In the R&D project disclosed in the company's annual report, the development of multi-trak cable components for servers was added to enable the interconnection of the internal motherboard to the backplane of the server and the motherboard to the accelerator card. Currently, it is still in the pilot phase. AI has enabled the rapid development of new fields such as humanoid robots, and the market space continues to expand, and the number of AI servers has also ushered in explosive growth. High-speed wiring products have very broad application prospects, and the company will strengthen its high-frequency and high-speed product layout in AI-related fields.
The competitive pattern is stable, fully benefiting from the intelligent upgrading of new energy vehicles. In 2023, the company's automotive connectors achieved revenue of 823 million yuan, an increase of 60% over the previous year. According to data from the China Automobile Association, China's NEV production reached 9.587 million units in 2023, an increase of 35.8% over the previous year, and sales are expected to reach 11.5 million units in 2024. In addition, domestic NEV exports reached 1.03 million units in 2023, an increase of 77.6% over the previous year, showing a global trend of continuous expansion of exports and domestic and overseas expansion. As the level of intelligence of domestic new energy vehicles continues to increase and overseas and domestic sales are booming, it is expected that the company's automotive connector business will continue to achieve high growth in 2024, and scale efficiency will also be reflected as production capacity expands.
Traditional consumer electronics businesses have benefited from the full recovery of the Android industry chain. In the second half of 2023, demand for Android phones recovered, and orders for the company's RF connectors and electromagnetic compatibility products also picked up in the second half of the year, and the gross margin level was relatively stable. In addition, the company's BTB products continue to cooperate closely with leading customers. Among them, RF BTB products have been used in batches for core customers and have received good market feedback. Under the trend of domestic substitution, it is expected that the share of the company's BTB products among leading customers will further increase.
Profit forecast and valuation: Since the release of demand from the mobile phone and automobile markets of the company's core customers exceeds previous expectations, we expect the company's net profit to be raised from 4059/597 million yuan to 2024-26 to net profit of 6.15/8.08/11.14 billion yuan (+72.6%/+31.5%/+37.8%), corresponding to the current market value PE of 29/22/16x, maintaining a “buy” rating.
Risk warning: Risk of automotive customer growth falling short of expectations, risk of declining consumer electronics demand.