The company's revenue increased 13% year over year in '23, and net profit after deducting non-return to mother improved in 1Q24 compared to the same period last year. In '23, the company achieved revenue of 9.34 billion yuan (YoY +12.8%), net profit of 59 million yuan (YoY -90.7%), which was impacted by slowing consumer electronics market demand, increased chip price competition, and the LED business dragged down, with a gross profit margin of 22.2% (YOY-7.2pct); of these, LED's gross profit margin was -1.01% (YOY-13.99pct), and LED subsidiary Silan Mingxin lost -216 million yuan. Entering 1Q24, the company's product shipments continued to increase revenue of 2,465 billion yuan (YoY +19%, QoQ +1%), net profit after deducting non-return to mother of 130 million yuan (YoY +17.5%, QoQ +206.4%), and gross profit margin of 22.1% (YoY-4.07pct, QoQ+3.19pct).

Integrated circuits increased 14.88% year over year in '23, and product abundance increased. In '23, the company's integrated circuit revenue achieved 3.129 billion yuan (YoY +14.88%), gross profit margin of 29.47% (YoY-5.56pct), demand differentiation: IPM module revenue of the dominant product was 1,983 million yuan (YoY +37%), and shipments in the white power sector exceeded 100 million units, an increase of 38% over the previous year; due to falling product prices and weak demand, MEMS revenue declined in the short term. The domestic market share of product-side accelerometers reached 20%-30%, and IMU has gone to mobile phone manufacturers Bulk delivery; in addition, the company's 32-bit MCU works with industrial and white electronics customers to accelerate growth.

Revenue from discrete devices increased 8.18% year-on-year in '23, and automotive products advanced rapidly. The revenue for discrete devices in 23 years was 4.832 billion yuan (YoY +8.18%), with a gross profit margin of 22.73% (YoY-7.49pct). Despite the decline in gross margin due to product prices and production line utilization, the product structure continued to be optimized: IGBT revenue was 1.4 billion yuan, a year-on-year increase of more than 140%. The company's IGBT main drive modules were supplied in batches to customers such as BYD, Geely, Zero Run, GAC, Huichuan, Dongfeng, Changan, etc., and manufactured IGBT single-tube and MOS products in large quantities.

Silicon carbide main drive modules have been delivered in batches, and an 8-inch silicon carbide production line has been invested. The company already has a 6-inch silicon carbide production capacity of 9,000 pieces/month. About 5 car companies have used Silan silicon carbide main drive modules. It is estimated that more than 8,000 vehicles will be loaded in a single month in May, more than 20,000 vehicles in a single month in June, and a 24-year silicon carbide revenue target of 1 billion yuan. On this basis, the company signed the “8-inch SiC Power Device Chip Manufacturing Line Project Strategic Cooperation Framework Agreement” with the Xiamen Municipal People's Government and the Xiamen Haicang District People's Government, which plans to invest 7 billion yuan in the first phase and 5 billion yuan in the second phase to build an 8-inch silicon carbide production line of 720,000 pieces/year.

Investment advice: Since the company holds shares of Yuneng Technology and Anlu Technology, price fluctuations have had a big impact on the company's net profit due to fair value changes of -450 million yuan in 23; in addition, due to LED business drag down and product prices falling, the company's net profit for 23 was lower than our previous expectations; combined with the company's 23 and 1Q24 business conditions, the company's gross profit margin was lowered to consider the impact of changes in the company's fair value. The net profit for 24-26 is estimated at 3.18/5.47/729 million yuan (previous value estimated for 24-25 years) 8.12/1,176 million yuan), corresponding to PE 95/55/42x, maintaining a “buy” rating.

Risk warning: Silicon carbide expansion falls short of expectations, and downstream demand falls short of expectations.