1Q24 Performance is under pressure in the short term, and profitability continues to improve
According to the company's 2024 quarterly report, 1Q24's revenue was 2.17 billion yuan, down 18.6% year on year, mainly due to the decline in the company's small base station business; net profit to mother was 290 million yuan, down 5.9% year on year; net profit after deducting non-return to mother was 230 million yuan, down 18.3% year on year, mainly due to the decline in the company's investment income.
In 1Q24, the company's gross margin increased 3.7 pct year over year to 24.8%. Considering fluctuations in the demand side of the company's small base station business, we expect the company's net profit forecast for 2024-2026 to be 12.82/16.15/19.95 (previous value: 13.01/16.68/21.12) billion yuan, which is comparable to the company's consistent expectation of 29x PE in 2024. Considering the advantages of the company's entire industry chain layout, we give the company 31x PE in 24 years, corresponding to a target price of 39.54 yuan (previous value: 38.83 yuan), maintaining the “buy” rating.
Comprehensive gross margin continues to rise, maintaining a high level of investment in R&D
According to the company's 2024 quarterly report, the 1Q24 company's comprehensive gross margin was 24.8%, an increase of 3.7 pct over the previous year. Continuing the upward trend, we judge that it is mainly due to the optimization of the company's revenue structure and the company's promotion of cost reduction and efficiency. In terms of expenses, 1Q24's sales/management/ R&D/ finance rates were 5.7%/3.5%/6.4%/-1.4%, respectively, and were +1.2/+0.9/+1.6/-0.8pct, respectively. Among them, R&D maintained a high level of investment; the decline in financial expenses was mainly due to a year-on-year increase in interest income and a year-on-year decrease in interest expenses.
The sensing business consolidates its leading position; the digital optical module market continues to advance and looks forward to the future. The company is expected to consolidate the leading position in the smart home sensor and NEV PTC heater industry, anchor the new energy and upstream and downstream industry chains, and drive the rapid growth of the company's perceived business revenue. Furthermore, in the field of optical communication, the company is vigorously promoting the data center business, and is expected to enjoy the release of demand for 400G and other high-speed optical modules brought about by the domestic computing power side. According to the company's 2023 annual report, the company's 800GLPO silicon optical module won the “Most Competitive Optical Communication Product” award in the 2023 ICC Xinshi Hero List; the company's first 400GZR+ Pro coherent optical module product received widespread attention from major customers at home and abroad, and we think it is expected to become a new growth point for the optical module business; on the other hand, the company has basically achieved autonomous and controllable high-end optical chips and has full self-development and design capabilities from silicon chips to modules.
Maintain a “buy” rating
Considering fluctuations in the demand side of the company's small base station business, we expect the company's net profit forecast for 2024-2026 to be 12.82/16.15/19.95 (previous value: 13.01/16.68/21.12) billion yuan, respectively. Comparable to the company's 2024 Wind consensus, the average PE value is 29x. Considering the advantages of the company's entire industry chain layout, the corresponding target price is 39.54 yuan (previous value: 38.83 yuan), maintaining the “buy” rating.
Risk warning: Overseas market expansion of optical modules falls short of expectations; the competitive pattern in the optical communications industry deteriorates.