Incident: Recently, in an interactive Q&A with investors, the company mentioned that NFC inductors have already been supplied to brand customers. Samples of 10bands-DiFeM have now been verified on the client side, and the 8bands-DiFeM is still in the sample flow testing stage. Sample delivery verification is expected in the second half of the year. The company's L-FEM module has been mass-produced and supplied, and the DiFEM module will also be mass-produced in the short term.
Benefiting from the recovery in the consumer electronics market, the company's performance improved year over year. In 2024Q1, the company achieved operating income of 680 million yuan, +1% year-on-month, and -12% month-on-month; realized net profit of 60 million yuan, +32% year-on-year and -28% month-on-month. The main reasons for the changes in the company's performance are: 1) the consumer electronics market is picking up, and the company's headquarters orders and overall gross margin both increased year-on-year; 2) the subsidiary's business returned to the traditional low season, and the subsidiary's performance declined year-on-year due to a decline in the volume and price of new orders.
Continue to strengthen the automotive electronics and new energy markets, and repair the electronic components business. In 2023, the headquarters and subsidiary Kanegawa electronic components business achieved revenue of 1.56 billion yuan, +8% year over year; achieved gross margin of about 24%, or 0.5 pct year over year. In 2024, the company will continue to focus on the two major markets of automotive electronics and new energy: 1) In terms of the magnetic device business, the company actively improves the magnetic device business layout and continues to accelerate the construction of customized magnetic device production lines and automotive electronics buildings. Related products have already entered the introduction stage for customers such as BYD and Anbofu, and are expected to contribute stable revenue to the company in 2024. 2) In terms of RF business, the company will focus on the technical layout of SAW filters and LTCC filters, optimize advanced wafer processes and specifications, invest in the construction of wafer test lines, and focus on building an industrial chain integrating RF materials, filters and other RF devices.
The performance of the subsidiary Xingyuan Electronics is under pressure in the short term, and the application of display modules continues to expand. In 2023, the LCM liquid crystal display module business achieved revenue of 1.45 billion yuan, -14% year on year; gross margin was about 14%, +0.4 pct year on year. Against the backdrop of short-term pressure on performance, Xingyuan Electronics continues to expand product applications and customer resources, and cooperates with customers at home and abroad such as Amazon, Samsung, and TCL in various fields such as consumer electronics, intelligent industrial control, and automotive electronics. In addition, Xingyuan Electronics will continue to follow up on cutting-edge fields such as AMOLED and micro-LED to further expand its product layout.
We forecast that the company's earnings per share for 24-26 will be 0.39/0.47/0.51 yuan respectively (the original 24-25 forecast was 0.48/0.55 yuan, which mainly adjusted revenue and gross margin forecasts based on market conditions). Based on comparable companies' 24-year 23 PE valuation level, the corresponding target price would be 8.97 yuan, maintaining the purchase rating.
Risk warning
The progress of production expansion falls short of the expected risk, the risk of gross margin fluctuations, and the risk of asset impairment.