In 2023, revenue increased 8% year over year, and net profit to mother increased 20% year over year. The company's 23 year revenue was 231.95 billion yuan (YoY +8.35%); net profit to mother of 10.953 billion yuan (YoY +19.53%); net profit not attributable to mother of 10.185 billion yuan (YoY +20.65%). The consumer electronics business still contributed to the main revenue increase.
1Q24 had revenue of 52.407 billion yuan (YoY +4.93%), net profit of 2.471 billion yuan (YoY +22.45%), with a net profit margin of 4.91% (YoY +0.71pct), mainly due to: 1) the increase in gross margin brought about by the Group's cost reduction and efficiency through digital intelligence information platforms; 2) the increase in investment income of associated enterprises; 3) The devaluation of RMB is relatively beneficial to export-oriented enterprises; 4) The increase in monetary capital brought about a corresponding increase in interest income. In addition, the company released a 1H24 performance forecast, which is expected to achieve net profit of 52.27-545 billion yuan, an increase of 20-25% over the previous year, and net profit after deduction of 4.789-5,077 billion yuan, an increase of 15%-22% over the previous year.
In 2023, the company achieved a gross profit margin of 11.58%, -0.61 pct. In 2023, the company achieved a gross profit margin of 11.58% (YoY -0.61pct), mainly increasing the revenue share of low-margin system-level assembly products. Furthermore, inventory prepared at a high exchange rate at the end of 2022 was sold at 1H23. In terms of expenses, the company optimized internal processes through digital intelligence transformation to improve labor efficiency and reduce costs. The operating expenses ratio for sales management and research in 2023 was 6.3% (YoY -0.41pct), and the net profit margin was 5.3% (YoY +0.4pct).
The in-depth layout of high-speed interconnection products is expected to benefit the high-speed transmission needs of AI computing power. In '23, the communications interconnection business had revenue of 14.5 billion (YoY +13.28%) and a gross profit margin of 15.8% (YoY +4.67pct). The communications sector mainly revolves around the two major scenarios of data centers and communications, creating dual engines with core components and system-level design and manufacturing. Currently, the company's product line covers five fields: connectors and cables, communication radio frequency, optical interconnection, thermal management and power supply. In the field of high-speed data center interconnection, the company collaborated with leading chip manufacturers to proactively develop next-generation high-speed connection standards such as 800G and 1.6T for mainstream data centers and cloud service providers around the world. Products in some segments, such as external high-speed copper cables, cables and connector components, have all been highly recognized by customers.
The connected car business contributed the second largest increase in revenue. The company's automotive sector revenue in '23 was 9.252 billion yuan (YoY +50.46%). Relying on strong intelligent manufacturing platforms and industrial capabilities accumulated over many years in the field of consumer electronics and communications, the company quickly achieved cross-border empowerment of products related to the automotive industry, and opened products related to the automotive business (high/low voltage wiring harnesses, high-speed wiring harnesses, charging guns, automotive connectors, smart cockpit controllers, LCD meters, 3-in-1 motor systems, AR HUD, DMS, etc.) Broad market space.
Investment advice: The company has a comprehensive and in-depth layout of the consumer electronics business, car interconnection business, and has achieved accurate card positions in AI computing power and automobile intelligence. We are optimistic about the company's development for a long time. We expect net profit to be 133/172/205 billion yuan in 24-26. Based on relative valuation, the company was given 20-22 times PE over 24 years, with a target price of 36.95-40.64 yuan. The first coverage gave it a “buy” rating.
Risk warning: Sales volume for major customers fell short of expectations; development of new businesses such as automobiles and communications fell short of expectations.