Event: The company released its 2023 annual report and 24Q1 quarterly report:
) 2023: Revenue of 21.02 billion yuan, +4.7% year on year; net profit to mother of 550 million yuan, -43.9% year on year; net profit without return to mother of 140 million yuan, +43.7% year on year. Gross profit margin 21.76%, -9.0pct year over year.
2) 23Q4: Revenue of 5.94 billion yuan, +26.5% year over month, -4.6% month on month; net profit to mother of 190 million yuan, +116.2% year on year, -13.0% month on month; net profit without return to mother was 08 billion yuan, +100.7% year on year, -96.1% month on month. Gross profit margin 23.0%, -1.6pct year over year, +1.2pct month-on-month.
3) 24Q1: Revenue of 5.64 billion yuan, +30.2% year over month, -5.0% month on month; net profit to mother of 550 million yuan, +180.5% year on year, +197.9% month on month; net profit without return to mother of 570 million yuan, +2476.8% year on year, +6844.5% month on month.
Gross profit margin 27.9%, +3.2pct year over year, +4.9pct month-on-month. The 24Q1 equity incentive fee was 0.69 million yuan (-75 million yuan in 23Q1), and net profit considering taxes and fees was 616 million yuan. Inventory 24Q1 was 6.67 billion, about a quarter's revenue, which is a very healthy level.
The mobile phone industry had its ups and downs in '23, and the introduction of new products helped increase revenue. Demand in the 23H1 mobile phone industry is sluggish, and demand in the 23H2 industry is gradually recovering. New high-end mobile phone CIS products such as OV50H launched by Weil were recognized by leading mobile phone brands. They were successively installed in flagship models such as the Xiaomi 14 and iQOOO12. Smartphone revenue was +44% year-on-year in 23, and the revenue contribution of 50M and above products in smartphones exceeded 60%. In addition, the automotive electronics business continued to grow (+25% compared to the same period in '23), driving a marked increase in overall revenue. At the same time, the optimization of the product structure and supply chain structure has promoted a gradual increase in the company's gross margin.
High-end products have established a leading position, and mobile CIS has entered a new period of growth. The 24Q1 Honor Magic 6 Extreme Edition was released, equipped with Vail's oversized OV50K. The original LOFIC technology can reach 15EV ultra-high dynamic range, which is comparable to SLR cameras.
In addition, the company's OV50E and OV50D products have fully blossomed in applications such as flagship secondary cameras, mid-range and low-end primary and secondary cameras, and telephoto cameras for leading Android customers, and the CIS mobile phone has entered a new period of growth. With large-scale shipments of the company's high-end product series, 24Q1 revenue & profit achieved significant growth, and product structure optimization and cost control led to a year-on-month increase in gross margin.
The simulation business expanded to automobiles and promoted the introduction of multiple in-vehicle product verification. In 2023, the company completed the acquisition of Xinlite and expanded its automotive analog chip R&D team in Tianjin to expand the simulation business in the automotive market. In '23, the company's analog business revenue was +13.4%. With the verification and introduction of various products such as CAN/LIN, SerDes, PMIC, and SBC, and subsequent large-scale shipments, the simulation business will enter a faster growth curve.
Investment advice: Based on the latest financial data, we have adjusted our previous profit forecast. We expect the company's net profit to be 3.5/48/6 billion yuan in 2024-26 (previously $3.344 billion in 2024-25), corresponding to the PE valuation 34/24/20 times, and maintain a “buy” rating.
Risk warning events: The recovery in demand for mobile phones fell short of expectations, the introduction of new products fell short of expectations, sales of new energy vehicles fell short of expectations, and the risk that the information used in the research report was not updated in a timely manner.