Event: On April 29, the company released its 2023 Annual Report and 2024 Quarterly Report.
2023: Revenue of 1,297 billion yuan, -10% year on year; net profit to mother - 531 million yuan, turning loss year on year; gross profit margin of 27.4%, -12.5 pcts year on year. The decline in gross margin was mainly due to the company actively increasing its market share. Sales of chip products increased more than in the same period last year, but the gross margin declined due to certain pressure on product prices. The loss in 2023 was mainly due to a decline in gross margin, inventory impairment, and increased operating expenses such as R&D expenses.
2023Q4: Revenue of 292 million yuan, -28.3% year-on-month, -17.7%; net profit to mother of -167 million yuan, a year-on-year loss, comparable to the month-on-month loss level; gross profit margin 22.8%, -10.0 pcts year on year, -0.7 pcts month on month; inventory of 874 million yuan, down 3.9% from the end of 23Q3.
2024Q1: Revenue of 329 million yuan, +9.2% year-on-month, +12.7% month-on-month; net profit to mother, year-on-month loss increase. The year-on-year increase was mainly due to a year-on-year decline in gross margin, a year-on-year increase in R&D expenses, and an increase in asset impairment losses due to falling inventory prices. The month-on-month increase was mainly due to the reversal of share payments in 23Q4, so looking at 24Q1's R&D expenses/sales expenses/management expenses month-on-month; gross profit margin 27.7%, -2.9 pcts, +4.9 pcts month-on-month; inventory 813 million Yuan, down 7.0% from the end of 23Q4.
Inventory was removed for three consecutive quarters, and gross margin began to rise. 2023Q3's inventory began to be eliminated, with 23Q3, 23Q4, and 24Q1 inventories falling 1.8%, 3.9%, and 7.0%, respectively. As high-priced wafer inventory was consumed, and the company continued to launch new products through product design and process optimization and continuous introduction of new products, the continuous optimization of the product structure also had a positive impact on gross margin, and 24Q1 gross margin rebounded by 4.9 pcts month-on-month.
Continue to promote product diversification and launch a variety of new products. The company continued to launch new products in all major directions of the power management and signal chain, and released various products such as 100V DC-DC, step-down DC-DC, amplifiers, comparators, and analog switches in 2023; in terms of electronic protection switches (eFuse), it launched an industry-leading 50A power tube integrated product, which has the advantages of low conduction power consumption, high starting current capacity, and strong protection performance in harsh conditions, and has been widely praised by customers in the computing field; in terms of LDO, the company launched a variety of automotive-grade LDOs in 2023, which can be applied to smart cockpits and assisted driving etc., and introduced a variety of ultra-low noise, high-performance, high-current LDO for communication and servers.
Supported by virtual IDM cards, DrMOS+ multiphase forms a complete product matrix. Under the virtual IDM model, the company has proprietary process technology, and can develop and optimize the wafer manufacturing process based on the fab's production line resources. The advantage is that it can launch products with high process requirements such as high-voltage power supplies better and faster. The company's 30A to 90A DrMOS and 6-phase and 8-phase multiphase controllers have all been mass-produced. Among them, 90A DrMOS will be the key products to be launched in 2023, and controller products with other phases will be launched one after another. At present, the company has formed a complete DRMOS+ multi-phase product matrix in application fields such as PC-server-AI-autonomous driving.
Investment advice: In 2023, due to declining gross margin, maintaining high R&D investment, inventory impairment, etc., the company's profit was temporarily pressured. The company's net profit forecast for 2024-2026 is estimated to be -3.71/-0.31/+193 million yuan (previously forecast 2024/2025 was -0.96 billion +240 million yuan), and the 2024/5/13 closing price corresponding to PE is -17/-204/+33 times. Take into account:
1) The competitive pattern in the analog IC industry began to ease as small companies cleared, and 24Q1 companies' gross margins have begun to rise significantly, and the gross margins of other major companies in the industry have also begun to rise;
2) Inventory impairment has a big impact on the company's current losses. The 24Q1 company lost 209 million yuan, and the asset impairment loss due to inventory impairment reached 102 million yuan. Currently, the company has been out of inventory for three consecutive quarters. With the consumption of high-priced wafers, inventory impairment is expected to decrease later, and losses are expected to narrow significantly; 3) The company's virtual IDM model card position still has unique advantages. Future application scenarios for high-current and high-voltage products have good prospects. Currently, DrMOS and multiple controllers are leading the way in China, with AI computing power and servers As localization progresses, the company is expected to usher in high growth. Combining the above factors, the company's “buy” rating is maintained.
Risk warning events: downstream sentiment recovery falls short of expectations; risk of macro-environmental fluctuations