Incident: The company released its 2023 annual report and 2024 quarterly report. The company's revenue in 2023 was 27.185 billion yuan, -7.35% year over year; net profit to mother was 605 million yuan, +7.84% year over year; after deducting non-net profit of 526 million yuan, +4.74% year over year. The 24Q1 Company's revenue was 10.337 billion yuan, +146.95% YoY, +5.10%; net profit to mother was 128 million yuan, +50.24% YoY, +30.35% YoY; after deducting non-net profit of 85 million yuan, +13.96% YoY, -7.75% YoY.
Major projects increased significantly, and revenue doubled in 24Q1: Revenue side: The company's revenue declined slightly in '23. By business, 1) Smartphone revenue was 21,822 billion yuan, or -10.07% year-on-year. The gross profit margin was 8.68%, +1.15pct. 2) Tablet revenue was 2.509 billion yuan, -10.33% YoY. The gross profit margin was 9.96%, +2.18pct. 3) AIoT product revenue of 2,511 billion yuan, +33.04% YoY. Gross profit margin 21.08%, -0.42pct year over year. The 24Q1 company's revenue doubled, mainly due to major customers such as Xiaomi, Samsung Electronics, and Huawei, which had significant growth in major projects in various categories, which led to a significant year-on-year increase in shipments. Profit side:
The company's gross profit margin in 2023 was 9.95%, +1.45pct year on year; net profit margin was 2.22%, +0.31pct year on year.
24Q1 gross profit margin 7.01%, year-on-year -7.23pct, +0.12pct month-on-month; net profit margin 1.22%, -0.82pct yoy, +0.24pct month-on-month. Expense side: The sales/management/R&D/finance expense ratio in 2023 was 0.29%/1.49%/6.21%/-0.36%, with year-on-year changes of +0.10/+0.26/+1.07/-0.14pct, respectively.
The three major businesses go hand in hand, and the leading smartphone ODM position is stable: 1) According to Counterpoint data, the company's global smartphone ODM/IDH manufacturer's share of shipments in '23 was 27.3%, ranking second in the world. Looking ahead to 24, Counterpoint expects smartphone ODM/IDH shipments to increase 4% year over year. Benefiting from the recovery in overall demand for consumer electronics and the continued growth in shipments from domestic mobile phone brands, the company's position as the leading global smartphone ODM market is stable. We are optimistic that the company will continue to lead the global smartphone ODM market. As overall market demand recovers and the main projects continue to grow, the scale of the smartphone business is expected to grow rapidly. 2) Tablet PC: In 2023, the company accounted for more than 50% of ODM shipments for some brand customers, and has become one of the main suppliers of tablet ODM. The company's tablet business covers a complete product line from entry to high-end flagship, and has end-to-end core competitiveness from R&D and design to mass delivery. 3) AIoT: The smartwatch business shipped more than 10 million units in 23 years, and business revenue increased 21.17% year over year, with Wear OS watches being shipped on a large scale. TWS earphones have successfully shipped millions of units. Furthermore, in '23, the company received a breakthrough in the 10-million-level bracelet business for Korean customers. In the field of XR equipment, the company has continued to cooperate with leading global Internet customers on two-generation smart glasses products. With the support of AI technology, the second-generation smart glasses product market sales performance is good. In addition, the company is also cooperating with leading domestic AR brand customers on AR computing power unit products and is actively developing overseas AR product markets.
New businesses accumulate strength, AIPC+ automotive electronics inject new momentum: 1) AIPC: AIPC accelerates implementation to drive the switching cycle, and the penetration rate increases rapidly, and is expected to become a huge incremental market for the PC industry. According to Canalys data, global AIPC shipments will reach 51 million units in 24, with a market share of 19%, and the market share is expected to reach 71% in 2028. The company entered the AI PC market in 2023 and reached a strategic cooperation with Qualcomm in the field of various smart products, including AI PCs. The company successfully obtained AI PC projects from domestic brand customers in '23, and is expected to ship in '24. 2) Automotive electronics: It mainly includes two major businesses in the smart cockpit and chassis domain. In terms of smart cockpits, categories include domain controllers, central control screens, armrest screens, wireless mobile phone chargers, etc. Among them, wireless charging products are already being shipped one after another. In terms of the chassis domain, the company has now been designated for the international Tier 1 chassis domain safety parts project. Relevant production lines have been built at the Huizhou base, and customer certifications are being passed one after another.
First coverage, giving an “additional” rating: The company is a leading smart hardware ODM company, providing professional integrated smart product services for the world's leading consumer electronics brands and leading global technology companies. The main customers include Xiaomi, Samsung Electronics, Huawei, Lenovo, Honor, OPPO, vivo, etc., forming a layout covering smartphones, tablets, smart watches/bracelets, AI PCs, automotive electronics, TWS headsets and XR products. The company implements a “1+Y” product strategy, where “1” represents a smartphone and is the company's core business. The company will continue to consolidate the scale and advantages of the mobile phone business, focus on leading customers, and ensure a leading position in the industry. On the AIoT side, the company has a comprehensive layout, multiple segments are growing rapidly, and the XR business is building new highlights. In addition, the company is actively expanding new businesses, and AIPC has promoted the PC market to usher in a new growth cycle, bringing huge increases. With in-depth cooperation between the company and Qualcomm, AIPC products are expected to be shipped in 24, which is expected to bring great flexibility to the company. The automotive electronics business is progressing smoothly, and related products are being shipped one after another, injecting new momentum into the company's growth. The company's net profit for 2024-2026 is estimated to be 737 million yuan, 935 million yuan, and 1.50 billion yuan. EPS is 1.58 yuan, 2.01 yuan, and 2.47 yuan respectively, and the corresponding PE is 28X, 22X, and 18X, respectively.
Risk warning: Industry cycle fluctuations, downstream demand falls short of expectations, market competition increases risk, and exchange rate fluctuation risk.