Incidents:
1. The company released its 2023 annual report: In 2023, the company achieved revenue of 33.651 billion yuan (year-on-year increase of 6.56%), net profit to mother of 1,965 billion yuan (year-on-year decrease of 17.05%), and gross profit margin of 15.18% (year-on-year decrease of 2.42pct).
2. The company released its report for the first quarter of 2024:2024Q1 achieved revenue of 7.745 billion yuan (year-on-year increase of 18.94%, year-on-month decrease of 30.54%), net profit of 289 million yuan (year-on-year decrease of 38.65%, decrease of 54.21% month-on-month), and gross profit margin of 13.60% (year-on-year decrease of 1.20 pcts, year-on-month decrease of 4.03 pcts).
Comment:
Gross profit margins are under pressure, and core business performance is steady. 2024Q1 gross margin declined year-on-year, mainly due to increased competition in core businesses and the upward trend in new production capacity. In the field of electronic circuits, the core business, according to Prismark research report data, based on the 2023 revenue scale, the company had the second largest FPC revenue in the world and the third largest PCB in the world in 2023, showing good resilience and competitiveness. By business, in 2023, the company's electronic circuit products achieved revenue of 23.261 billion yuan (year-on-year increase of 6.61%), gross profit margin of 20.79% (year-on-year decrease of 0.22pct); LED display devices achieved revenue of 1,190 billion yuan (year-on-year decrease of 29.24%), gross profit margin of -26.67% (year-on-year decrease of 35.48pct); touch panels and LCD modules achieved revenue of 4.862 billion yuan (year-on-year increase of 42.88%); gross profit margin of 1.77% (year-on-year increase of 0.47pct); precision component products achieved Revenue of 4.162 billion yuan (year-on-year decrease of 8.45%), gross profit margin of 10.71% (year-on-year decrease of 4.98 pcts).
The A+T strategy continues to advance, and the LED business is expected to improve in 24 years. The company has accelerated the expansion and layout of the NEV product line. Work is progressing smoothly with new base investment, new customer certification, and mass production of new products. In the future, ASP can be expected to increase with the commissioning and integration of the company's overseas factories; in the field of soft and hard boards, there is still room to increase the company's share; the LED and touch business, the company's profitability is expected to gradually recover as industry inventories are removed. We are optimistic about the company's development over 24 years.
Profit forecast, valuation and rating: Considering that downstream consumer electronics demand fell short of expectations, we lowered the company's 24-25 net profit forecast to be 23.29/2,774 billion yuan (down ratio: 37.49%/41.94%), and the new company's net profit forecast for 26 years to $3.245 billion, corresponding to the current PE valuation of 11/9/8X. The steady development of the company's hard and soft boards in the consumer electronics sector is at the forefront of the world, and with years of experience, it has successfully deployed new energy in the three major sectors of PCB, optoelectronic displays and precision manufacturing, and continues to expand its material numbers and customers. We are optimistic about the company's long-term development and maintain a “buy” rating.
Risk warning: The development of automobile electrification falls short of expectations, consumer electronics demand falls short of expectations, and the risk of major customer dependency.