Incident: On April 25, the company released its 2024 quarterly report.
In the first quarter of 2024, the company achieved operating income of 348 million yuan, an increase of 7.63% year on year; realized net profit of 140 million yuan, an increase of 8.57% year on year; realized net profit after deduction of 134 million yuan, an increase of 4.71% year on year.
Accounts receivable increased sharply year on year, and the company's performance has full potential for growth. By the end of the first quarter of 2024, the company's notes receivable and accounts receivable were $1,736 million, up 76.47% year on year; notes payable and accounts payable were 385 million yuan, down 7.48% year on year. The sharp increase in accounts receivable may indicate that the company's downstream orders continue to grow, and future performance is expected to continue to strengthen. We believe that the company's performance is expected to continue to grow, and downstream orders may continue to increase.
Focus on scientific and technological innovation, and steadily enhance competitiveness
In 2023, the company will focus on deepening the “two cores” of state-owned enterprises to enhance core competitiveness, enhance core functions, and focus on building a new product system to achieve breakthroughs in new fields such as RF microwaves, clock circuits, and isolators; second, continue to increase R&D investment and launch nearly 100 new products; third, actively explore the deep integration of “industry, education and research” to consolidate the development foundation of RF microwave and other product directions through technical cooperation with universities; 4 is to strengthen test platform construction, expand measurement capabilities, and achieve a number of key technologies to consolidate the ability to provide users with overall solutions.
On April 19, 2024, the company released the “Special Report on the Storage and Actual Use of Funds Raised in 2023". The progress of the company's high-reliability analog integrated circuit wafer manufacturing and advanced packaging and testing industrialization projects reached 2.94%. We believe that the company's R&D investment may continue to grow, and the progress of fund-raising projects is expected to be strongly promoted, and it may lay a solid foundation for subsequent product expansion.
The overall cost rate was manageable during the period, and the interest rate level is expected to resume the company's net interest rate of 39.93% in the first quarter of 2024, -3.86pcts year on year; achieving a gross profit margin of 71.57%, or -0.6 pcts year on year. Expense rate for the first quarter was 18.24%, +1.02pcts year on year: sales expense ratio 2.46%, -1.7pcts year on year; management expense ratio 6.89%, +1.08pcts year on year; financial expense ratio -0.98%, +2.05pcts year on year; R&D expense ratio was 9.88%, -0.4pcts year on year. We believe that the company's overall expenses during the period are within a manageable range. The company's “improving quality, efficiency, and valuing return” plan mentions optimizing the company's operation and management. The company is expected to improve quality and efficiency in the next quarter to achieve a recovery in interest rates and a reduction in expenses.
Profit prediction and rating: The company is deeply involved in the military integrated circuit market. It has a complete chip design platform, a SiP full-process design platform and a high-reliability package design platform. It has high-reliability packaging capabilities in various forms such as ceramics, metal, and plastic, as well as complete inspection and testing capabilities such as electrical performance testing, mechanical testing, environmental testing, and failure analysis. It designs and develops products such as signal chains and power managers, and has a clear first-mover advantage in the domestic high-reliability integrated circuit field. The company's product business benefits from the orderly progress of national defense informatization construction. The iterative upgrading of new equipment and equipment will bring new market space to high-reliability integrated circuits, and the company's business is expected to enter a continuous growth cycle. At the same time, as the company continues to make efforts on the industrial side and market side, the company's operating capacity improves steadily, and the company's long-term development is optimistic. Considering the slight decline in the performance growth rate for the first quarter of '24, we slightly adjust the profit forecast. We expect the company's net profit to be 6.82/8.45/1,035 billion yuan (2024 and 2025 forecast values were $795/1,081 million yuan), with a corresponding P/E of 19.39/15.66/12.79X, maintaining a “buy” rating.
Risk warning: risk of R&D falling short of expectations; risk of high customer concentration; risk of tax policy changes; risk of trade friction; risk of demand-side slowdown or adjustment, etc.