Gekowei released the 2023 Annual Report and 2024 Quarterly Report: In 2023, the company achieved operating income of 4.697 billion yuan, a year-on-year decrease of 20.97%; realized net profit of 48.245 million yuan, a year-on-year decrease of 89.01%; and realized deducted non-net profit of 61.6872 million yuan, a year-on-year decrease of 82.57%. In 2024, Q1 achieved operating income of 1,289 billion yuan, an increase of 51.13% over the previous year; realized net profit of 30.1634 million yuan to mother, and realized deducted non-net profit of 11.9739 million yuan, all of which turned a loss into a profit, and there was a significant increase over the previous year.
Key points of investment
Downstream demand is slowing down and costs are rising, and short-term performance is under pressure in Q1
In 2023, the company achieved revenue of about 4.697 billion yuan, a year-on-year decrease of 20.97%, achieved net profit of 48.245 million yuan, a year-on-year decrease of 89.01%, and realized deducted non-net profit of 61.6872 million yuan, a year-on-year decrease of 82.57%. Mainly affected by macroeconomic factors such as geopolitics and global inflation, along with the slowdown in demand in the consumer electronics market and the decline in the popularity of the mobile phone industry, shipments of the company's traditional dominant products declined, causing the company's annual revenue level to decline. Focusing on the profit side, the company rapidly iterated on high-pixel products, and the company controlled the pricing strategy as a new entrant, leading to a decline in gross margin. At the same time, the company's fund-raising projects reached a predetermined state of use, and production lines began to accrue depreciation. The combination of factors dragged down the company's annual profit level. 2024Q1's performance picked up significantly, achieving revenue of 1,289 billion yuan, a year-on-year increase of 51.13%, achieving net profit to mother of 30.1634 million yuan, and deducting non-net profit of 11.739 million yuan, all of which turned a loss into a profit, with a significant year-on-year increase. The recovery in 2024Q1's performance is mainly due to the company's smooth expansion of high-pixel products based on a single-chip architecture, a decline in the cost side, and a recovery in the consumer market.
High-end CIS mobile phones accelerate penetration, and DDIC product layout continues to improve
In 2023, the company achieved mass production and shipment of 13 million, 16 million and 32 megapixel CIS mobile phones, gradually entering the middle and high-end channel. Among them, 32 megapixel products use the GalaxyCell 0.7 μm process with the company's latest FPPI patented technology. Combined with the 4Cell Bayer architecture, it can achieve equivalent 1.4 μm pixel performance, and also supports SHDR video recording, providing mature high-pixel solutions for high-end smartphone front camera requirements, and the market share continues to expand.
At the same time, the company's display driver chip business has covered resolutions from QQVGA to FHD+. With further improvement in differentiation capabilities, the products have been applied in various smart scenarios such as smart homes, medical care, and commercial displays. In addition, the company already has relevant technical reserves for AMOLED driver chip products, and will soon launch AMOLED display driver IC products, which is expected to become an important driving force for the company's performance growth.
FAB-Lite model transformation results can be expected in the future, and long-term incentives show determination for high-end development
The official commissioning of the company's Lingang plant marks the transformation of Fabless to Fab-Lite. Through the foundation of its own Fab production line, the entire product has been completed from design to sales, and product competitiveness has been further strengthened. In the future, the company plans to establish a more efficient endogenous product development model to form a closed loop mechanism from product design to mass production, and process development efficiency is expected to be greatly improved. At the same time, in order to fully mobilize the enthusiasm and creativity of core talents, the company announced the repurchase of the company's shares in March 2024, all for employee shareholding and/or equity incentive plans. As of April 30, 2024, the company had repurchased a total of 3.9054 million shares, accounting for 0.1502% of the company's total share capital. The highest price of the repurchase transaction was 18.00 yuan/share, and the lowest price was 15.12 yuan/share. The total amount of capital paid was RMB 644.64 million (excluding stamp duty, transaction commissions, etc.) costs). In June 2023, the company announced a limited equity incentive plan, which uses revenue from products with 13 megapixel specifications and above as the incentive assessment target, demonstrating the company's firm determination to advance to mid-range and high-end CIS products.
Profit forecasting
It is predicted that the company's revenue for 2024-2026 will be 64.39, 79.97 billion yuan, and 9.774 billion yuan, EPS 0.10, 0.18, and 0.24 yuan, respectively. The current stock price corresponds to PE of 159.9, 88.3, and 68.7 times, respectively. We are optimistic about the company's technical reserves and business model transformation, and maintain an “increase” investment rating.
Risk warning
Macroeconomic risks, risk of product development falling short of expectations, risk of increased industry competition, risk of downstream demand falling short of expectations, risk of equity incentives falling short of expectations.