Incident: The company released its 2023 annual report and 2024 quarterly report. The company achieved revenue of 913 million yuan in 2023, a year-on-year decrease of 17.43%; realized net profit of 150 million yuan, a year-on-year decrease of 34.30%; and realized deducted non-net profit of 116 million yuan, a year-on-year decrease of 43.28%. In Q1 2024, we achieved revenue of 241 million yuan, up 7.90% year on year and 4.00% month on month; realized net profit of 49 million yuan, up 72.37% year on year and 24.90% month on month; realized deducted non-net profit of 39 million yuan, up 92.74% year on year and 28.46% month on month.

The 23-year results were under year-on-year pressure, and Q1 profit increased rapidly year over year: The company's performance for the full year of 2023 was under year-on-year pressure, mainly due to the downturn in consumer electronics markets such as mobile phones, and the decline in packaging orders and shipments. The company achieved rapid year-on-year profit growth in Q1 in 2024, mainly due to an increase in the company's business and revenue scale. In Q1 2024, the company's gross margin was 42.44%, up 6.22 pcts year on year, up 3.31 month on month; the company's net margin was 20.81%, up 7.15 pcts year on year, up 2.94 pcts month on month. The company's gross margin and net interest rate increased year on year, and profitability further improved. In terms of expenses, the company's sales, management, R&D and financial expenses in Q1 2024 were 0.84%/8.92%/12.93%/-2.23%, respectively, with year-on-year changes of -0.06/+1.24/-2.35/ -1.49pct, respectively. The company's financial expense ratio declined year-on-year, mainly due to an increase in the company's interest income.

Actively develop miniature optical device technology and continue to promote the global layout: In 2023, the company will further increase its investment in Dutch Anteryon and collaborate to integrate the optical device design, R&D and manufacturing capabilities of Anteryon and Suzhou Jingfang Optoelectronics. At present, it has dual optical business centers in the Netherlands and Suzhou, and also has precision optical design, wafer-level optical processing technology, precision glass processing capabilities, and diversified technology and product service capabilities integrating related system modules, effectively increasing the scale of mass production and commercial applications. At the same time, the process level and mass production capacity of wafer-level optical device (WLO) manufacturing technology are also constantly increasing, and the commercialization scale and new product development capabilities of related products in the field of automotive intelligent interaction have improved significantly. In 2023, the company will strengthen collaboration and integration with Israel's ViSiC, strive to expand high-power gallium nitride technology for vehicles, make full use of its advanced packaging industry and technical capabilities, and develop technical and industrial layout to seize industrial development opportunities in the field of new energy vehicles. The company actively promotes the company's market expansion, technology research and development and global production and investment layout, and establishes an international platform in Singapore. On the one hand, it plans and adjusts the investment structure of the company's overseas subsidiaries and projects, and on the other hand, the layout expands overseas markets, R&D and production centers to better meet the needs of overseas customers, promote process innovation and project development, and maintain a continuous leading position in the industry.

Market demand is gradually recovering, and automotive+TSV packaging contributed to growth momentum: According to data released by SIA, global semiconductor industry sales totaled US$526.8 billion in 2023, down 8.2% year on year; in terms of quarterly trends, sales rebounded in the second half of 2023. Of these, sales for the fourth quarter were US$146 billion, up 11.6% year on year and 8.4% month on month. December 2023 sales were $48.6 billion, up 1.5% month-on-month. As an important part of the semiconductor industry, the smart sensor market represented by image sensors (CIS) also showed a similar development trend in 2023. Overall market demand declined, but the second half of 2023 began to show a recovery trend. In 2023, the company will continue to innovate and optimize the process according to product and market needs. On the one hand, the company will continue to innovate and improve the TSV-STACK packaging process level in response to the needs of the automotive electronics field, and at the same time develop and expand new innovative processes such as A-CSP, thereby increasing the scale of mass production, improving production efficiency, reducing production cycles and costs, expanding new product markets, and continuously improving the company's technological leadership and business scale in the CIS field of vehicle regulations; on the other hand, In an environment of declining prosperity in application fields such as smartphones, security surveillance, and digital security, the company used its advantages in production capacity, technology, and core customers to consolidate and increase its market share in related fields and effectively expand into medium- and high-resolution products; at the same time, actively used the advantages of TSV advanced packaging technology to expand new application markets, and achieved breakthroughs in MEMS, RF, etc., and began mass production on a commercial scale, effectively expanding the market application of TSV packaging technology.

Lowering profit forecasts and maintaining the “purchase” rating: The company has 8-inch and 12-inch wafer-level chip size packaging technology and large-scale mass production capacity; the company independently developed ultra-thin wafer-level chip size packaging technology, silicon through-hole packaging technology, fan-out packaging technology, and packaging technology for automotive electronics, etc., which are widely used in image sensing chips, environmental sensing chips, medical electronic devices, microelectromechanical systems, biometric identification chips, automotive electronics, etc. However, due to the slump in the consumer electronics market such as mobile phones, the company's 23 year performance was under pressure. We lowered our profit forecast. We expect the company's net profit to be 302 million yuan, 410 million yuan, and 503 million yuan respectively in 2024-2026, and EPS 0.46 yuan, 0.63 yuan, and 0.77 yuan respectively. The corresponding PE is 40X, 29X, and 24X, respectively.

Risk warning: risk of exchange rate fluctuations, downstream demand recovery falling short of expectations, risk of technological innovation, risk of market competition.