Incident: The company released its annual report for the year 2010 and the quarterly report for 2014, achieving revenue of 510 million yuan (-31.5%) for the whole year; realized net profit of 330 million yuan (-736.6%); of these, the 23Q4 alone achieved revenue of 110 million yuan (-56.3%); and net profit to mother of 120 million yuan (-475.4%). The 24Q1 company achieved revenue of 120 million yuan (+1.6%); net profit to mother was -80 million yuan (-3.6%). Short-term performance was under pressure, and repairs gradually began.
The 23-year performance was pressured by the industry cycle, and the 24Q1 performance improved month-on-month. In 2023, the company was affected by multiple factors such as changes in the industry cycle, and its performance was under pressure. The company optimizes sales channel management, actively explores the market, and accelerates R&D iteration. 24Q1 revenue and net profit returned to mother increased month-on-month. 1) By business, industrial control chips/information technology chips/solutions achieved revenue of 1.6/0.9/250 million yuan respectively for the full year of '23, a year-on-year decrease of 41.2/51.3%/8.1%, respectively. 2) In terms of profit margin, the company's gross margin and net margin were 36.1%/-65.2%, respectively, and gross margin decreased by 11.0pp, mainly due to a decrease in product sales and an increase in the fixed cost share for a single product, compounded by the pressure on the company's prices for some products to expand the market. 3) In terms of cost ratio, the company's sales/management/R&D expenses in '23 were 21.0%/25.2%/84.0%, respectively, up 8.8 pp/11.4 pp/41.6 pp, respectively. The company's management expenses increased by 25.658 million yuan, mainly due to the increase in intellectual property litigation and related arbitration expenses. After deducting such expenses, management expenses were basically the same as the previous year. The company actively expanded the market and continued to increase R&D investment. The R&D expenses for 23 years were 430 million yuan, an increase of 35.7% over the previous year.
4) In terms of cash flow, the company's net cash flow from operating activities in 2023 was -410 million yuan, an increase of 46.6% over the previous year.
In 24Q1, the company's net cash flow from operating activities was -0.1 billion yuan, an increase of 93% over the previous month.
The products have blossomed a lot, and the smooth progress of many new products is worth paying attention to. During the reporting period, the company launched the 3A6000, breaking through multi-threading technology, and the performance reached the level of the 10th generation quad-core core, and the cost was drastically reduced; the 3C6000 delivered streaming film, breaking through inter-chip interconnection technology; the 32-core chip 3D5000 completed commercialization work, and the 3D5000 dual-channel and four-channel servers completed verification. When the adjustment of the e-government market stagnated, the company's server and terminal board revenue still increased dramatically; in addition, the second-generation Longchip graphics processor core LG200 basically completed pre-silicon verification, supporting graphics acceleration, scientific computing acceleration, and AI acceleration. Dragon core products bloom a lot.
Actively respond to the market downturn and drive chip sales with solutions. During the reporting period, the company actively responded to the stagnation of e-government market adjustments and developed white-label servers and cloud terminal products, partially offsetting the decline in sales revenue caused by the stagnation of the e-government market. Furthermore, while focusing on informatization in the field of e-government and security applications, the company actively explores key industries such as telecommunications and energy to improve marketing efficiency. The company enhances its competitiveness in the policy market through improved product performance and cost performance, combined with continuous optimization of ecological compatibility capabilities.
In '23, the traditional e-government market was in a period of adjustment and stagnation. Longxin's CPU sales revenue in the information technology sector dropped sharply, but revenue from servers and terminal boards increased dramatically.
Profit forecasting and investment advice. The company's revenue for 24-26 is expected to be 8/10/1.3 billion yuan respectively, and the compound growth rate is expected to reach 37.1% in the next three years. Considering the competitive cost ratio and performance of the company's products, the launch of new products is carried out in an orderly manner, and the volume is imminent. We maintain the company's “buy” rating.
Risk warning. There are risks such as product development progress falling short of expectations, and the recovery of the Xinchuang market falling short of expectations.