Incidents:
Zhiwei Intelligence released its 2023 report and 2024 quarterly report. The company achieved operating income of 3,665 billion yuan in 2023, an increase of 20.86% year on year; net profit to mother was 0.3 million yuan, a year-on-year decrease of 72.44%. The company achieved operating income of 714 million yuan in 24Q1, a year-on-year decrease of 10.37%; net profit to mother was 0.13 million yuan, a year-on-year decrease of 64.13%.
Comment:
Revenue from consumer and industrial products increased significantly, and the benefit cycle recovered and AI resonated. The company's revenue from industry terminal products in 2023 was 2.506 billion yuan, up 33.54% year on year; revenue from industrial IoT products was 102 million yuan, up 76.03% year on year. The company's products cover the three major business segments: industrial terminals (such as OPS, cloud desktops, various PCs, etc.), ICT infrastructure (such as servers, network security devices, switches, etc.), and industrial IoT (such as industrial motherboards, industrial computers, industrial displays, etc.). The company actively lays out new products and launched a series of OPS conference modules supporting Intel, ARM and localized platform architectures for education and conference scenarios. In the field of ICT infrastructure, the company has independently developed and iteratively updated a variety of server motherboards.
Factors such as bottoming out gross margins and dividend payments are dragging down net interest rates. The company's gross margin for 23Q4/24Q1 was 12.64%/12.94%, respectively, up 3.04/0.30pct from month to month; net margin was 0.17%/2.15%, respectively. The company's profit margin was affected by some non-demand factors. 1) The company completed investment in new production lines and the relocation of old production capacity in 2023, and depreciation and unpaid expenses increased dramatically; 2) the company's 2023 and 24Q1 share payments reached 50 million yuan and 12 million yuan, respectively. In the future, profit margins are expected to rise as the company's product upgrades and the share of high-margin industrial IoT products increases.
With the rise of Hongmeng, smart networking is about to speed up. As a leading provider of intelligent networking hardware products and solutions in China, through deep cooperation with platforms such as Rockchip and Phytium, the products are perfectly adapted to the open source Hongmeng system and launched various products including OPS, cloud terminals, edge terminals, etc., which can be applied to the Internet of Things, education, commercialization, and personal home scenarios. The company has now become one of the few companies in the industry that can complete “cloud network edge” one-stop hardware, providing complete hardware selection and customization services around customer needs.
Profit forecast and investment rating: We expect the company's 2024-2026 revenue of 41.5/49.1/5.87 billion yuan, net profit to mother of 1.0/1.3/170 million yuan, corresponding PE 71x/54x/41x, respectively. Covered for the first time, a “gain” rating was given.
Risk warning: downstream demand falls short of expectations; product development falls short of expectations.