Incident: The company released the 2023 Annual Report & 2024 First Quarter Report. In 2023, it achieved revenue of 2.07 billion yuan, a year-on-year decrease of 11.8%; net profit to mother was 140 million yuan, a year-on-year decrease of 26.3%; and net profit after deducting non-return to mother was 130 million yuan, a year-on-year decrease of 25.6%. 2024Q1 achieved revenue of 410 million yuan in a single quarter, down 19.5% year on year; net profit to mother was 34.192 million yuan, down 38.1% year on year; net profit after deducting non-return to mother was 32.23 million yuan, down 39.2% year on year.
Short-term performance is under pressure, waiting for high-end products to be released. The company's performance in '23 was under pressure, mainly due to macroeconomic impacts, and downstream demand has yet to recover. By product, switch products are still the company's main source of revenue, accounting for 80.9% of revenue, achieving revenue of 1.68 billion yuan, a year-on-year decrease of 19.9%, mainly due to adjustments in major customer project cooperation models and the impact of downward market factors; in terms of routers and wireless products, the company's comprehensive competitiveness has been strengthened, and the corresponding product share for customers has increased to 270 million yuan, an increase of 32.1% year on year; the communication component product sector achieved revenue of 120 million yuan, an increase of 150.2% year on year, mainly automotive vehicle networking T-BOX and intelligent vehicle control There was a breakthrough in displays and gateways, and mass production and shipment began. By market, almost all of the company's main business was domestic business in '23. The company actively expanded overseas business. Currently, it has successfully developed Japanese customers and gradually formed stable orders.
Investment in research and development continues to be increased, and domestic substitution continues to advance. In 2023, the company invested 140 million yuan in R&D, an increase of 33.2% over the previous year. In the middle and high-end data center switch product section, the company iterated 12.8T and other product forms on 2.0T/8.0T, expanded the COME module test laboratory based on domestic CPUs, and invested in 16G/25G high-end oscilloscopes, various reliability test equipment, environmental test equipment, and network protocol test equipment (including Sifos testers), effectively improving internal R&D design verification capabilities and ensuring test coverage.
New products continue to break through, and long-term development is full of momentum. The company's product matrix continues to be improved: 1. With data center AI and network technology upgrades, the company has broken through the market segment of data center switch applications, and has hardware development capabilities for mainstream interface rate, high bandwidth, and large capacity switches in 100G/400G data centers. During the reporting period, 2.0T/8.0T data center switches were mass-produced and delivered, and other data center switches such as 12.8T are also being steadily tested in small batches; 2. The access network will gradually transition from gigabit to 10 gigabit in the next three years, and it is expected that multi-rate switches will surpass in 2025 The market share of gigabit switches and 2.5GE switches is growing rapidly, driven by demand for WiFi6 and WiFi7. 2.5G multi-rate access switches are in high demand, and the company is mass-producing and delivering corresponding 2.5G access switches for supporting WIFI 7 AP products; 3. The IoT gateway part, along with the network upgrades of domestic operators, has seen a significant increase in the company's IOT gateway, especially the 4G/5G gateway category for edge computing.
Profit forecasting and investment advice. EPS is expected to be 2.61 yuan, 3.49 yuan, and 4.82 yuan respectively in 2024-2026, corresponding to 30, 23, and 16 times PE, respectively, maintaining the “holding” rating.
Risk warning: Risks such as fluctuating demand from downstream customers, increased market competition, falling short of expectations in fund-raising projects, and rising prices of upstream raw materials.