Guangfeng Technology released its 2023 Annual Report and 2024 Quarterly Report. In 2023, the company's revenue was 2.21 billion yuan (YoY -12.9%), net profit to mother of 100 million yuan (YoY -13.6%), gross profit margin 36.2% (YoY+3.6pct), net profit margin 0.8% (YoY-0.4pct), and sales/management/financial/R&D expense ratios were +0.4pct/-0.5pct/+2.4pct, respectively. The 2023 results are under pressure, mainly due to fluctuations in the consumer electronics market, and the decline in revenue from the company's core household devices business and C-side products.

2024Q1's revenue is under pressure, and profit margins have improved. 2024Q1 revenue was 450 million yuan (YoY -3.0%), net profit to mother of 40 million yuan (YoY +226.2%), gross profit margin 32.4% (YoY-2.9pct), net profit margin 9.3% (YoY+9.6pct), and sales/management/financial/R&D expense ratios were -3.2pct/-0.4pct/-1.4pct/-1.7pct, respectively. The improvement in profit margins was mainly due to the steady recovery of the cinema business and the positive contribution of investment income and income from changes in fair value to net profit. At the same time, the company optimized cost management, and expenses fell 20.6% year-on-year during the period.

The in-vehicle business began to contribute to performance, and the cinema business grew steadily. In December 2023, the company officially launched the first fixed-point model, the Wanjie M9, and entered the intensive mass production delivery stage in March 2024. The automotive optics business entered a revenue contribution period, and the 24Q1 automotive optics business contributed 50 million yuan in revenue. In terms of the cinema business, the film market continued to improve, driving the company's cinema business revenue to increase 37.2% year-on-year in 2023, and 2024Q1 to increase 21% year-on-year. In addition, 24Q1 Fengmi Technology carried out optimization and adjustment of the business and personnel structure, and the overall quality of operations continued to improve. The loss margin decreased by 40.1% compared to the same period, and the negative impact on the company's profits weakened.

Profit forecast and investment advice: Net profit due to mother for 24-26 is estimated to be 1.8, 2.4 million yuan, and 310 million yuan, respectively, with year-on-year growth rates of 70.1%, 37.4%, and 27.4%, respectively. The latest closing price corresponding to 2024 PE is 51.57x. Referring to comparable company valuations and the company's dividend level, the company was given 60 times PE in 2024, corresponding to a reasonable value of 22.77 yuan per share, giving it an “increase in holdings” rating.

Risk warning: Technological innovation falls short of expectations, cyclical industry fluctuations, macro-environmental risks.