Incident: 1H23 achieved operating income of 884 million yuan (YoY -24.09%), realized net profit of 128 million yuan (YoY -46.96%), deducted net profit of 124 million yuan (YoY -45.38%). Looking at the split, 2Q23 achieved revenue of 468 million yuan (YoY -27.94%); net profit attributable to mother of 0.7 million yuan (YoY -50.24%); net profit of 67 million yuan after deducting non-return net profit of 67 million yuan (YoY -49.57%).
Finance: Stable gross margin. 2Q23 The company's gross profit margin was 38.23%, a slight decrease of 0.7 pct over the previous month, and remained in the 37%-39% range for 7 consecutive quarters (4Q21-2Q23). As consumer market confidence recovers, high market inventories are gradually being removed to a relatively reasonable level, demand in the downstream terminal equipment market is expected to pick up, and demand for various product lines has shown a certain degree of stability.
Business: Smart vision chip leader, professional video, smart IoT, and smart car industries have blossomed. In the field of professional video processing, through the industry-leading front-end+back-end product line, covering analog high-definition systems and network high-definition systems, it has chip products and solutions such as professional cameras and full-link ultra-high-definition 8K video recorders. Currently, with the promotion of industrial robot applications, special machine vision chips will soon be launched. In the field of smart IoT: The company's smart SoC chips have been widely used in AIoT consumer electronics, etc. Product applications include chip products and solutions such as home cameras, smart access control, wireless cameras, and smart home appliances. With the introduction of large models, the company is rapidly developing chip solutions that are interconnected with large models and can recognize multi-modal input such as voice and body movements. Smart vehicle industry: The company's on-board vision chips have been introduced by many brand car manufacturers and Tier 1 solutions with high quality performance, covering a wide range of application scenarios, including streaming media rearview mirror E-Mirror, electronic rearview mirror CMS, ADAS, smart cockpit OMS, driver behavior monitoring DMS, high-definition surround view AVM, and driving recorders.
Vision: One-stop, front-end collaborative product layout to provide customers with cost-effective vision chips and solutions. The company has many series of chip products and solutions for application fields such as professional video processing, smart IoT, and smart vehicle marketing. The products include serialized end-side ISP/IPC chips, serialized edge-side XVR/NVR chips, and video transmission link RX chips. It has formed front-end and back-end collaboration, and has complete one-stop solution supply capabilities.
Profit forecasts and investment recommendations. As a leading security chip leader in China, the company can provide customers with a full range of multi-level video processing chip products from front-end to back-end. At the same time, the company's convertible bond projects actively deploy automotive electronics and AI NVR and AI IPC master control chips, and upgrade new applications to open up a new growth engine. We expect Fuhanwei's EPS to be 1.65, 2.18, and 2.75 yuan respectively from 2023 to 2025. Combined with the valuations of comparable companies, Fuhanwei was given a PE valuation of 32-40 times in 2023. The corresponding reasonable value range was 52.80-66.00 yuan, giving it a “superior to the market” rating.
Risk warning. Product development falls short of expectations, risk of related parties, fluctuations in raw material prices, and risk of international trade friction.