occurrences

The company released its 2023 annual report and achieved revenue of 2,616 billion yuan in 2023, YoY -17.94%; gross profit margin was 49.60%, down 9.38 pct year on year; net profit to mother was 281 million yuan, YoY -67.86%. Among them, 23Q4 revenue was 735 million yuan, YoY -5.25%, QoQ +0.25%; gross profit margin was 47.22%, down 1.79 pct from month to month; net profit to mother was 139 million yuan, YoY +12.87%, and QoQ +164.70%.

The company released its 24Q1 financial report, achieving revenue of 729 million yuan in the first quarter, YoY +42.03%, and QoQ -0.75%; gross profit margin of 52.49%, an increase of 5.27 pct over the previous quarter; net profit to mother of 54 million yuan, QoQ -60.80%, and YoY +80.04%.

The off-season is not dull; the worst time in the industry is over

The company's Q1 revenue was 729 million, YoY +42.03%, and QoQ was basically flat (-0.75%), while global analog leader TI Q1's analog revenue fell 9.10% month-on-month and 13.77% year-on-year. All downstream growth was negative. It can be seen that the domestic analog chip industry has emerged from an independent boom. Looking ahead to Q2 and the full year downstream, it is expected that the recovery of mobile phones will continue until the 2-3 quarter, and inventory removal in the pan-industrial sector is nearing its end.

From the industrial sector, we saw that high-end product breakthroughs increased gross margin starting at 22Q4, simulating a downward trend in the industry cycle, downstream customers cut prices and removed inventory, and the company's gross margin was under pressure. Beginning in 24Q1, thanks to the increase in high-end products and the promotion of new products, the company's gross margin increased by 5 pct to 52% month-on-month. Under TI's aggressive price reduction strategy, the company's gross margin stopped falling and rebounded in Q1 (and revenue did not fall sharply). It can be seen that starting with domestic simulation leaders, the improvement in the competitiveness of local products has been verified.

The company is continuously expanding its product line and strengthening its competitive advantage The growth of simulation companies comes from category expansion. Chips provided by analog manufacturers that can provide a full range of solutions can shorten design time for customers and reduce the risk of design failure/delay, making product coverage a top priority for analog chip companies. According to the company's annual report, the company's products fully cover the two major fields of signal chain and power management. There are more than 5,200 products available for sale in 32 categories. In 2023, more than 900 new products with completely independent intellectual property rights will be launched. Their comprehensive performance indicators have all reached the advanced level of similar international products, and can be widely used in industrial control, automotive electronics, communication equipment, consumer electronics and medical instruments. We have seen that the company's new product launch is accelerating, continuously strengthening its competitive advantage.

Investment advice

We expect the company's net profit to be 415, 7.77, and 1,095 million yuan respectively in 2024-2026, with corresponding EPS of 0.88, 1.65, and 2.33 yuan, respectively. The latest closing price corresponding PE is 90x, 48x, and 34x, respectively. For the first time, coverage gives the company a “buy” rating.

Risk warning

The recovery of the industry fell short of expectations, and the development of new products fell short of expectations.