Net profit for 1Q24 was strong. Focus on new products such as the 50M series to increase performance, and Vail announced its 23rd annual report and 1Q24 quarterly report. Corresponding to 4Q23 revenue of 5.939 billion yuan, a year-on-year ratio of 26.49%, gross profit margin of 22.98%, net profit to mother of 187 million yuan, a year-on-year increase of 116.15%, net profit after deducting non-return to mother of 8.1515 million yuan, and 4Q23 inventory level of 6.322 billion yuan, returned to normal levels. The company's 1Q24 revenue was 5.644 billion yuan, 30.18% year-on-year, gross profit margin 27.89%, and net profit to mother was 558 million yuan, an increase of 180.50% year-on-year, after deducting net profit of 566 million yuan. We believe that 1Q24's strong net profit is mainly due to reduced financial expenses and increased gross margin supported by lower wafer costs. Looking forward to the future, we believe that the comprehensive layout of the new 50M series of mobile phones in the low/medium/high/potential will help the company gradually increase its market share in high-pixel products in the future. We expect the company's net profit to be 25.1/32.2/3.87 billion yuan in 2024/25/26 to reflect the recovery in gross margin. Buy 61.5 times PE in 2024 (61.5 times the industry average in 2024), corresponding to a target price of 127 yuan.
2023: Smartphone/automotive electronic image sensor revenue increased 44%/25% year-on-year by business. The company's 2023 image sensor/touch and display/analog/semiconductor agent revenue was +13.6%/-16.7%, respectively, and the gross profit margin was 24.0%/9.5%/37.3%/98.7%, respectively, -9.6pct/-34.9pct/-4.0pct/-2.5pct. Among them, the main growth in the image sensor segment was a 44% increase in smartphone image sensor revenue (of which 50M and above pixel products account for more than 60% of revenue) and a 25% year-on-year increase in automotive electronic image sensor revenue. Among analog solutions, automotive analog ICs achieved large-scale revenue for the first time, accounting for 13% of total analog solution revenue. The company's inventory level declined quarterly. By the end of 2023, it had dropped to 6.32 billion yuan, returning to normal water levels.
2024: Low-cost foundry supports gross profit margin. The mobile phone/automotive product layout gradually reaped a gross profit margin of 27.89% in 1Q24, an increase of 3.17 pcts over the previous year, and an increase of 4.91 pcts over the previous year. We think it is mainly due to the decline in foundry prices and the positive impact of the exchange rate. We have seen that the company's 50M series smartphone product layout is perfect, and it is expected to maintain its leading position among high-end Android phones. On the automotive side, we expect automotive CIS to continue to grow rapidly, and LCOS/MCU/PMIC/CAN/Lin will continue to generate revenue in 24/25. On the display driver side, OLED products may start to generate revenue in the second half of '24 or the first half of '25.
Maintain the buy rating and increase the target price to $127
We expect the company's net profit to be 25.1/32.2/3.87 billion yuan in 2024/25/26 to reflect the recovery in gross margin. Buy 61.5 times PE in 2024 (61.5 times the industry average in 2024), corresponding to the target price of 127 yuan (previous value 115 yuan).
Risk warning: In the global semiconductor downturn cycle, demand for mobile phones, etc. falls short of expectations, and industry competition intensifies.