On April 29, the company released its 2023 annual report and 2024 quarterly report. In 2023, it achieved revenue of 1,337 billion yuan, YOY -26.22%; net profit to mother of 178 million yuan, YOY -31.67%. 2024Q1 achieved revenue of 641 million yuan, YOY +44.37%; net profit to mother of 65 million yuan, YOY +94.10%. The company's performance was generally in line with expectations.
Key points of investment
2024Q1's performance increased significantly year-on-year, and the gross margin continued to improve. The company is mainly engaged in R&D, design, manufacturing, and after-sales technical support for products such as computers and smart interactive displays in the intelligent interactive industry. Overseas business accounts for more than 90% of total revenue. Overall downstream demand weakened in 2023 due to factors such as the US dollar interest rate hike, and major customers began inventory adjustments from 2023Q1, which dragged down the company's performance. After nearly a year of adjustments, overseas demand gradually recovered from 2024Q1, and customers entered the inventory replenishment stage, compounding the sharp year-on-year increase in sales of Hongtong's subsidiary to provide performance increases. 2024Q1's revenue and net profit both ended four consecutive quarters of decline, turning losses into profits, with a sharp increase of 44.37%/94.10% year-on-year. In terms of profit margin, the gross profit margin in 2023 was 31.81%, YOY+3.22pct. Mainly high-margin products, the self-owned brand MicroTouch's share of revenue continued to increase, and the efficiency of superimposed supply chain management and production management continued to improve. The company's performance is expected to rise further in 2024 with the launch of new global customer-targeted projects and two-wheel drive upgrades to existing customer products.
Increase sales channels for your own brand MicroTouch and accelerate the layout of new categories
The company has been deeply involved in the US market for decades and has established long-term cooperative relationships with leading global brands. High-value-added products provide the company with long-term stable cash flow. In 2022, the company set up a subsidiary in Germany, began cooperation with distributors in Southeast Asia and Australia, and continued to expand new customers in new markets. Through distribution channels, the MicroTouch brand has been successfully applied in various fields such as retail, industrial control, logistics to kitchen assistance systems (KitchenDisplay). With the support of the MicroTouch brand, the company has created new profit growth points in various application fields such as industrial automation, smart medical care, and gaming. At the same time, the company has evolved from an ODM single business model to an ODM+ OBM MicroTouch dual business strategy, further enhancing the company's profitability and performance stability.
Actively promote investment and mergers and acquisitions, and continue to cultivate new growth points
In February 2023, it took a 30% stake in Ruixun Technology to strengthen cooperation in industrial control products and manufacturing such as motherboard design and the Internet of Things, and gradually launch new products; in September 2023, the company acquired 60% of Hongtong Technology's shares. After the transaction was completed, the company held a total of 70% shares in Hongtong Technology, extending the company's business from traditional fields such as smart retail, smart finance, industrial automation, and smart medical care to further strengthen the diversified layout of the business; in December 2023, ITH strengthened its wholly-owned subsidiary Li Technology's control enhances the company's technical strength in display panel driver and touch IC design, while further consolidating the cooperative relationship with supplier Yili Technology and improving supply chain stability. In short, through shareholding, mergers and acquisitions, capital increases, etc., the company extends the industrial chain vertically to enhance its technical strength, expand application fields horizontally to create new performance growth points, and continuously enhance the company's market competitiveness.
Profit forecasting
The company's revenue for 2024-2026 is estimated to be 27.85 billion yuan, 37.26 billion yuan, and 4.960 billion yuan, EPS is 1.97, 2.24, and 2.80 yuan, respectively. The current stock price corresponds to PE 14, 12, and 10 times, respectively. Driven by the trend of digitalization and intelligence, the market space for commercial human-computer interactive smart terminal equipment is vast. Considering the company's brand strength, customer resource advantages, manufacturing capabilities and supply chain management capabilities in the field of human-computer interaction devices, it was covered for the first time and gave a “buy” investment rating.
Risk warning
Downstream demand falls short of expectations, new production line capacity climbing progress falls short of expectations, technology iteration and other risks.