Driven by a recovery in industry demand in 2023, Huicheng Co., Ltd.'s revenue in a single quarter showed a quarterly growth trend. The company actively lays out AMOLED DDIC, advanced packaging, automotive-grade packaging and other fields to find new business growth points. Maintain an increase in holdings rating.
Key points to support ratings
Huicheng's 2023Q4 and 2024Q1 revenue grew steadily year over year. Huicheng Co., Ltd.'s 2023Q4 revenue was 343 million yuan, QoQ +1%, YoY +42%; gross profit margin 27.7%, QoQ-1.4pcts, YoY+3.8pcts; net profit after deducting non-attributable net profit of 51 million yuan, QoQ -6%, YoY +134%. Huicheng Co., Ltd.'s 2024Q1 revenue was 315 million yuan, QoQ -8%, YoY +31%; gross profit margin 19.2%, QoQ-8.6pcts, YoY-1.3pcts; net profit after deducting non-return to mother was 0.2 billion yuan, QoQ -56%, YoY +30%.
Driver chips picked up in 2023, driving the company's revenue to grow quarterly. In the first quarter of 2023, display driver chips as a whole continued to be sluggish in the second half of 2022. As the capacity utilization rate of panel manufacturers gradually recovered, demand for small and medium-sized panels recovered, and the pressure to eliminate display chip inventories eased, and market demand picked up rapidly from the second quarter of 2023. In 2023, Huicheng Co., Ltd.'s revenue in a single quarter was 2.41, 3.16, 3.38, and 343 million yuan respectively, showing a trend of increasing quarterly.
Actively develop fields such as AMOLED DDIC, advanced packaging, and automotive-grade packaging. Huicheng Co., Ltd. actively lays out new display fields such as AMOLED and Micro OLED through convertible bond projects, and actively lays out high-end advanced packaging technologies such as Fan-out and 2.5D/3D with Bumping technology. The company and NEV customers are connecting and verifying in-vehicle chips, and gradually industrialization is achieved.
valuations
Huicheng's 2024/2025/2026 EPS is expected to be 0.27/0.32/0.36 respectively. As of the close of trading on April 30, 2024, the total market value of Huicheng shares was about 6.9 billion yuan, corresponding to 2024/2025/2026 PE, 30.2/25.8/23.0 times, respectively. Considering the impact of the company's rising production capacity on depreciation, we slightly lowered the company's gross margin estimate for 2025. Maintain an increase in holdings rating.
The main risks faced by ratings
The recovery in market demand fell short of expectations. The development and verification of new products fell short of expectations. The competitive landscape in the market deteriorated.