Incident: In 2023, the company achieved operating income of 1,822 million yuan (YoY -13.65%), net profit attributable to mother of 255 million yuan (YoY -36.58%), and net profit of non-return to mother of 219 million yuan (YoY -38.57%).
In terms of split, 4Q23 achieved revenue of 473 million yuan (YoY +21.68%); net profit attributable to mother of 73 million yuan (YoY +43.42%); net profit after deducting non-attributable net income of 47 million yuan (YoY +69.78%).
Finance: Q4 gross margin decreased and net profit margin increased. 4Q23 The company's gross profit margin was 37.18%, down 3.62 pcts from month to month; net profit margin was 15.64%, up 5.09 pcts month on month. In addition, the company's chip inventory increased 36.44% year-on-year in 2023, mainly due to market conditions and customer needs, the company dynamically adjusted its inventory structure and targeted product stocking. We expect demand in the downstream terminal equipment market to pick up as consumer confidence picks up and high market inventories gradually disappear.
Business: Leading smart vision chips, professional video, smart IoT, and smart car companies are flourishing. In the field of professional video processing, the company's video front-end and back-end chip product layout is becoming more and more perfect, and all products support intelligence; high-computing power chip development and deep customer cooperation are gradually advancing; in the field of professional video processing SoC, it has a strong competitive advantage, and front-end IPC products and back-end NVR/XVR products have further expanded their share of key customers. In the smart IoT market, the company's related products integrate modules such as image signal processing, video and audio coding and decoding, intelligent video analysis, and security encryption and decryption. The company has established a self-developed solution research team and expanded new partners in the field of code scanning, smart video door locks, high-end video locks, etc., and video locks have been shipped in large quantities by solution providers. The rich product line not only meets the rigid requirements of users in terms of safety, but also has characteristics such as intelligence and low power consumption, and also has excellent cost performance and scale effects in the industry market. In the field of smart car industry, the company has formed a series of competitive products from vehicle rear to front, from inside to outside the cabin, and is in a leading position in the field of automotive applications with the advantages of safety, adaptability, and cost performance. The products cover driver monitoring DMS/cockpit monitoring OMS/panoramic surround view AVM/driving record DVR streaming media rear view STR-EMIRROR, external electronic rearview mirror CMS, etc. At the same time, AVM Surround View, a vehicle outboard product, completed program development, and received a good response from the market.
Profit forecasts and investment recommendations. As a leading security chip leader in China, the company can provide customers with a full range of video processing chip products from front-end to back-end. At the same time, the company's convertible debt projects actively lay out automotive electronics and AI NVR and AI IPC main control chips, opening up a new round of growth engines with new upgrades and new applications. We expect Fuhanwei's EPS from 2024 to 2026 to be 1.72, 1.91, and 1.95 yuan respectively. Combined with comparable company valuations, Fuhanwei was given a PE valuation of 20-25 times in 2024. The corresponding reasonable value range was 34.40-43.00 yuan, giving it a “superior to the market” rating.
Risk warning. Product development falls short of expectations, related party risks, raw material price fluctuations, and international trade friction risks.