Net profit to the mother fell by 22.50% in '23, maintaining the “buy” rating of Tianao Electronics. In 2023, it achieved revenue of 1,109 billion yuan (yoy -8.42%), net profit to mother of 87.1864 million yuan (yoy -22.50%), deducting non-net profit of 84.4952 million yuan (yoy -21.50%). Among them, Q4 achieved revenue of 466 million yuan (yoy -28.75%, qoq +106.91%) and net profit to mother of 63.7364 million yuan (yoy -6.59%, qoq +1049.75%). We expect the company's 2024-2026 EPS to be 0.28, 0.41, and 0.54 yuan respectively (the previous value was 0.63 and 0.83 yuan in 2024-2025). The reason for the reduction was due to changes in the procurement pace of downstream customers, and demand has declined in the past two years. Comparatively, the company's 24 wind unanimously expected an average PE value of 77 times, giving the company 77 times PE in 24 years, with a target price of 22.00 yuan (previous value of 35.28 yuan), maintaining a “buy” rating.
The time-frequency business declined. In 2023, Beidou satellite application products continued to grow. In 2023, the company's frequency series products achieved revenue of 571 million yuan, down 9.02% year on year, gross profit margin of 32.44%, up 1.87 pct year on year; time-synchronous series products achieved revenue of 492 million yuan, down 10.32% year on year, gross profit margin of 21.58% year on year, down 4.86 pct year on year. The company's time-frequency products are mainly used in the field of defense equipment. Affected by various factors in 23, the growth rate of contract orders slowed, and project acceptance and delivery in the fourth quarter declined compared to the same period last year, causing the company's revenue to decline year-on-year during the reporting period. The company's Beidou satellite application products achieved revenue of 46.24 million yuan, a year-on-year increase of 32.34%, gross margin of 29.71%, an increase of 14.25 pcts over the previous year, and the civilian product business continued to grow. The company's overall gross margin level in '23 was 27.51%, down 0.74pct year on year.
The expense ratio declined slightly during the period, and the balance ratio decreased
The company's expense ratio for the 23-year period was 17.03%, a year-on-year decrease of 0.67pct; of these, the sales expense ratio was 4.68%, up 0.88pct; the management expense ratio was 6.68%, up 0.13pct; and the R&D expense ratio was 6.38%, down 1.13pct year-on-year. The company's repayments declined in '23. The company received 779 million yuan in cash from selling goods and services, down 27.33% year on year; net operating cash flow was 233 million yuan, down 205.18% year on year; corresponding company accounts receivable and notes at the end of '23 were 1,161 million yuan, up 37.47% year on year, inventory was 599 million yuan, up 2.75% year on year; balance ratio was 39.54%, down 2.13 pct year on year.
24Q1 revenue continues to be under pressure, and business development is improving over the long term
The company achieved operating income of 107 million yuan in the first quarter of '24, a year-on-year decrease of 14.54%, and realized net profit to mother of -190 million yuan, compared to -111 million yuan in the same period last year, which has narrowed somewhat. In '23, the company strengthened market development, actively expanded product application areas, and orders achieved steady growth; breakthroughs were made in the application of rubidium clock modules; the nationally produced ballistic rubidium clock module completed prototype delivery and trial use by key customers, and received the title of “strategic supplier” awarded by customers; the company's nationwide crystal oscillator orders for time-frequency device products increased significantly year-on-year; and the atomic clock industrialization project basically reached mass production capacity.
Risk Warning: Missile and Spaceborne business expansion fell short of expectations; product prices continued to drop.