Core views
Due to demand pressure and an increase in layout in the early stages, revenue declined slightly in 2023, and profit declined significantly. In response to this, while actively expanding the market, the company took various measures to reduce costs and increase efficiency. The revenue and profit situation continued to improve month-on-month in all quarters of 2023. Overall operations continued to recover in the first quarter of 2024. Revenue grew relatively well, and net profit reversed losses year on year. In the future, under a positive economic trend, demand in the IoT industry is expected to gradually recover. Combined with the gradual implementation of the company's early business investment layout, the company's performance is expected to gradually recover.
occurrences
The company publishes its 2023 annual report and 2024 quarterly report. In 2023, the company achieved revenue of 13.861 billion yuan, a year-on-year decrease of 2.59%; realized net profit to mother of 90.71 million yuan, a year-on-year decrease of 85.43%. In the first quarter of 2024, the company achieved revenue of 3,954 billion yuan, a year-on-year increase of 26.06 percent; realized net profit to mother of 54.77 million yuan, an increase of 140.60% over the previous year.
Brief review
1. Due to pressure on demand and an increase in layout in the early stages, revenue declined slightly in 2023, and profit declined significantly.
In 2023, the company achieved revenue of 13.861 billion yuan, a year-on-year decrease of 2.59%; realized net profit of 90.71 million yuan, a year-on-year decrease of 85.43%; realized net profit of 5.67 million yuan after deduction, a year-on-year decrease of 98.82%. In 2023, the company's consolidated gross profit margin was 18.94%, a year-on-year decrease of 0.84pct.
The company's revenue declined slightly in 2023, and profit declined significantly, mainly due to various adverse factors in the international economic environment, pressure on demand in the IoT module industry, and the company's large investment in new business and new product line layout.
Looking at product segments, the company's module+antenna revenue in 2023 was 13.677 billion yuan, down 2.95% year on year; other revenue was 184 million yuan, up 34.03% year on year. Looking at market segments, the company's domestic revenue in 2023 was 6.571 billion yuan, up 0.60% year on year, and overseas revenue was 7.290 billion yuan, down 5.30% year on year.
In 2023, the company achieved a net cash flow of 1,037 billion yuan from operating activities, an increase of 106.66% over the previous year. It was mainly driven by the company's strengthened cash flow control. Payments related to operations were made through money orders and credit purchases using longer account periods as much as possible.
2. Revenue and profit improved month-on-month for each quarter of 2023.
With the gradual recovery of demand in the downstream market, the company strengthened and perfected the company's development and business strategy, adjusted its business strategy in a timely manner, and adopted various measures to reduce costs and increase efficiency, which gradually led to an improvement in profitability. In 2023, the company's revenue and profit improved month-on-month in each quarter. The company's revenue for the first to fourth quarter of 2023 was 3.137 billion yuan, 3.375 billion yuan, 3.455 billion yuan, and 3.894 billion yuan, respectively. In the first quarter of 2023, the company's net profit to mother was a loss of 135 million yuan, and the second to fourth quarter of 2023 achieved net profit of 20 million yuan, 97 million yuan, and 109 million yuan respectively.
In 2023, the company's three expenses (sales, management, R&D) totaled 2.51 billion yuan, up 17.85% year on year. The total three expenses for the first to fourth quarter of 2023 were 652 million yuan, 615 million yuan, 577 million yuan, and 665 million yuan respectively, up 46.60%, 28.67%, 0.60%, and 5.10% year-on-year respectively. By the end of 2023, the number of employees was 5,619, a decrease of 314 compared with the end of 2022. The main technical personnel were streamlined. In 2023, the company's financial expenses were 78.31 million yuan, mainly driven by an increase in the company's share of overseas sales settled in US dollars. The company's exchange loss in 2023 was 3.41 million yuan, and the exchange loss for the same period in 2022 was 62.44 million yuan.
3. Revenue increased relatively well in the first quarter of 2024, and overall operations continued to show a positive recovery trend.
With the gradual recovery of downstream market demand, the company actively expanded market opportunities. In the first quarter of 2024, the company achieved revenue of 3,954 billion yuan, an increase of 26.06% over the previous year; net profit to mother was 54.77 million yuan, reversing losses over the previous year. In the first quarter of 2024, the company's consolidated gross margin was 16.93%, a year-on-year decrease of 0.66pct. Cost reduction and efficiency improvements continue to advance. In the first quarter of 2024, the company's three expenses (sales, management, R&D) totaled 585 million yuan, a year-on-year decrease of 10.30%, including sales expenses of 109 million yuan, a year-on-year decrease of 5.96%; management expenses of 96 million yuan, a year-on-year decrease of 1.16%; and R&D expenses of 380 million yuan, a year-on-year decrease of 13.46%.
In the first quarter of 2024, the company's financial expenses were 2006 million yuan, a year-on-year decrease of 62.39%. In the first quarter of 2024, the net cash flow from the company's operating activities was -709 million yuan, and in the first quarter of 2023 it was 278 million yuan, mainly due to increased preparation of raw materials, etc.
4. Profit prediction and investment advice.
Downstream demand in the IoT industry is sluggish, and the company's performance is under pressure, but through measures such as reducing costs and increasing efficiency, the company's operations have shown a positive trend in each quarter. Demand in the IoT industry is expected to gradually recover, compounded by the gradual implementation of the company's early business investment layout, and the company's performance is expected to gradually recover further. We expect the company's revenue from 2024 to 2026 to be 16.652 billion yuan, 19.185 billion yuan, and 22.110 billion yuan, respectively, and net profit to mother will be 462 million yuan, 755 million yuan, and 1,010 billion yuan respectively. The current market value corresponding to PE is 23X, 14X, and 10X, respectively, maintaining a “buy” rating.
5. Risk warning: Demand recovery in the IoT industry fell short of expectations, causing the company's performance to recover less than expected; changes in the international environment affected the security and stability of the supply chain and the company's overseas expansion; market competition intensified, affecting the company's market share, or leading to a decline in the company's gross margin; changes in trade policy affected the company's raw material supply and product delivery; large exchange rate fluctuations affected the company's gross margin and exchange profit and loss; the company's internal operating efficiency and cost control fell short of expectations; the company's own production capacity fell short of expectations, affecting the company's gross profit margin; The development of online applications falls short of expectations, affecting the company's revenue; the company's expansion of new businesses such as GNSS, ODM, and cloud falls short of expectations; the company continues to expand, and management and governance capabilities and refinement need to be continuously improved. If the company is unable to effectively control, there may be a risk of business deterioration, etc.