occurrences
On April 19, 2024, the company released the 2023 annual report and the report for the first quarter of 2024. In 2023, the company achieved operating income of 5.761 billion yuan, a year-on-year decrease of 29.14%; net profit to mother was 161 million yuan, a year-on-year decrease of 92.15%. In the first quarter of 2024, the company achieved operating income of 1,627 billion yuan, up 21.32% year on year and 19.10% month on month; net profit to mother was 205 million yuan, up 36.45% year on year.
Key points of investment
The 24Q1 performance was outstanding, and profitability improved significantly. Affected by the global economic environment and industry cycle, the terminal market is weak and product prices have dropped significantly. In 2023, the company achieved operating income of 5.761 billion yuan, a year-on-year decrease of 29.14%; net profit to mother was 161 million yuan, a year-on-year decrease of 92.15%. As consumer demand picked up, 24Q1 revenue and net profit to mother increased dramatically. 24Q1 achieved operating income of 1,627 billion yuan, up 21.32% year on year and 19.10% month on month; realized net profit of 205 million yuan, up 36.45% year on year. Based on the company's core strategy of increasing sales and expanding market share, shipments of various product lines such as NORFLASH and DRAM products have increased steadily. Against the backdrop of continued recovery in consumer product demand and product prices stopped falling and rebounding, the company performed well in 24Q1.
Product prices have rebounded steadily, and product lines continue to be improved to seize market share. (1) NorFlash: In terms of NOR Flash products, the company's 2023 Serial NOR Flash market share ranking further rose to second place, and the products included 16 types of capacity (512KB-2GB).
In 2023, the company's shipments of this product reached a record high, reaching 2,533 million units, achieving a year-on-year increase of 16.15%. The GD25UF series 1.2V low voltage ultra-low power SPI NorFlash products launched by the company significantly reduced operating power consumption, and the successive introduction of new products stabilized the company's industry advantage in this product field. (2) NAND Flash: In terms of NAND Flash products, the company has achieved full mass production in both 38nm and 24nm processes, and SPI NADN FLASH products have achieved full product coverage in the fields of consumer electronics, industry, communications, automotive electronics, etc. In SLC NAND Flash products, competitors in the industry occupy a high market share. The company entered this market segment through differentiated product demand, achieved local leadership, and continued to seize market share. At the same time, against the backdrop of stabilizing demand for mobile phones and PCs, combined with AI trends, the recovery in demand and prices for mainstream products is expected to drive SLC NAND products to recover. (3) DRAM: The company is actively entering the DRAM memory niche market and has launched products such as DDR4 and DDR3L. According to the TrendForce survey, niche DRAM prices began to fall in the fourth quarter of 2021 and began to rise in the fourth quarter of 2023, and the trend is positive.
At the same time, the company expects to launch DDR4 8Gb products in 2024, and will continue to develop LPDDR4 products in the future, demonstrating the company's confidence in DRAM products. In addition, the company expects the amount of transactions related to Changxin Storage to increase from 362 million yuan in 2023 to 852 million yuan in 2024, and there is considerable room for growth in self-developed DRAM products. (4) MCU: The company has successfully mass-produced 46 product lines and more than 600 MCU products. The company officially launched China's first GD32H series ultra-high performance microcontroller based on the Arm Cortex-M7 core in 2023. At the same time, it is also steadily advancing the new dual-band dual-mode wireless MCU GD32VW553 series products based on the RISC-V core, continuing to inject new impetus. The decline in the company's MCU product revenue gradually narrowed in the second half of 2023, and showed signs of month-on-month stabilization in 23Q4. Shipments of automotive-grade MCU products also achieved good year-on-year growth in 2023, and are currently actively cooperating with leading domestic and foreign companies.
Investment advice:
We expect the company to achieve revenue in 2024-2026, respectively
74.30/90.21/11.02 billion yuan, and realized net profit of 10.51/15.57/2.048 billion yuan, respectively. The current stock price corresponding to 2024-2026 PE is 50 times, 34 times, and 26 times, respectively, maintaining a “buy” rating.
Risk warning:
Downstream demand recovery fell short of expectations; new product development fell short of expectations; increased market competition, etc.; risk of impairment of goodwill.