Incidents:
On March 25 and April 29, 2024, Guanghetong released the 2023 Annual Report and 2024 Quarterly Report respectively: in 2023, the company achieved operating income of 7.716 billion yuan, an increase of 36.65% over the previous year; realized net profit attributable to shareholders of listed companies of 564 million yuan, an increase of 54.47% over the previous year. In the first quarter of 2024, the company achieved operating income of 2.123 billion yuan, an increase of 17.11% over the previous year; net profit attributable to shareholders of listed companies was 188 million yuan, an increase of 33.78% over the previous year.
Opinions:
Deeply expand the market and achieve steady growth in performance. In 2023, the company continued to invest resources in key industries and achieved good market results in vertical industries such as automotive front-end equipment and FWA. At the same time, since the third quarter of 2023, the PC business gradually resumed, leading to steady growth in the company's 2023 performance. In 2023, the company achieved operating income of 7.716 billion yuan, an increase of 36.65% over the previous year; net profit attributable to shareholders of listed companies was 564 million yuan, an increase of 54.47% over the previous year. In the first quarter of 2024, benefiting from the continued improvement of new energy vehicles, the company's in-vehicle business revenue continued to grow; at the same time, the PC business continued its boom since the third quarter of 2023; in addition, as demand for downstream applications gradually recovered, the company experienced significant growth in the first quarter in the fields of smart payments, smart grids, sharing economy, and video surveillance. In the first quarter of 2024, the company achieved operating income of 2.123 billion yuan, an increase of 17.11% over the previous year; net profit attributable to shareholders of listed companies was 188 million yuan, an increase of 33.78% over the previous year.
Focus on vertical sectors to improve profitability. The company focuses on large market vertices, and has a good market position and advantages in the automotive, FWA, PC and other fields. The market threshold in these fields is also relatively high, and the competitive pattern is clear. In 2023, the company's IOT wireless communication application achieved a gross profit margin of 23.20%, an increase of 3.12 percentage points over the previous year.
Continue to increase R&D and product layout to consolidate the company's competitive advantage. The company has always paid attention to R&D investment, keeping up with the market frontier, and continuously carrying out technological innovation and research and development to ensure that the company is in a leading position in increasingly fierce market competition, while improving the company's product line to meet the needs of customers in various industries. In 2023, the company's R&D model was mainly independent research and development, and R&D investment accounted for 9.28% of the company's revenue.
Profit forecast and investment rating: The company focuses on automotive, FWA, PC and other fields. It has a good market position and advantages, and its profitability has been improved. At the same time, the company has always focused on R&D investment, keeping up with the market frontier, and continuously carrying out technological innovation and research and development to ensure that the company is in a leading position in the increasingly fierce market competition. We expect the company to achieve operating income of 9.311 billion yuan, 11.502 billion yuan, 13.486 billion yuan, and net profit to mother of 718 million yuan, 884 million yuan, and 1,061 billion yuan in 2024-2026, respectively. The current stock price corresponding to PE is 18.5, 15.0, and 12.5 times, respectively. The first coverage gives a “buy” rating.
Risk warning: Market demand for the company's products falls short of expectations; prices of the company's products fall; industry competition intensifies; risk of exchange rate fluctuations; adverse changes in the macro environment; the cited data sources publish erroneous data.