3Q23 performance is slightly lower than we expected.
The company announced its results for the first three quarters of 2023: revenue in the first three quarters was 256 million yuan, + 45.16% compared with the same period last year; gross profit 60.5%, year-on-year-5.14 ppt; net profit 51 million yuan, + 50.63%; deduction of non-return net profit 43 million yuan, + 68.68%. Among them, 3Q23 realized income of 129 million yuan, year-on-year + 30.39%, month-on-month + 22%; gross profit 58.7%, year-on-year-6.91ppt; month-on-month + 1.83ppt; return to the mother net profit of 28 million yuan,-15.36%, month-on-month + 49.88%. We believe that the delay in order delivery confirmation is mainly a drag on revenue, so 3Q23 performance is slightly lower than we expected.
Trend of development
Review the first three quarters of 2023: continuously increase R & D investment and expand product matrix. In the first three quarters of 2023, the company's sales expenses, management expenses and R & D expenses were 23 million yuan, 23 million yuan and 146 million yuan respectively, and the expense rates were 9.14%, 9.12% and 57.05% respectively, of which the R & D expenditure rate increased by 12.66% compared with the same period last year. This reflects the company's continued increase in R & D investment, and we expect the company's equipment and software product matrix to continue to expand.
Delayed delivery of orders is a drag on revenue, but the long-term space remains the same. The net inventory value of the company at the end of 3Q23 was 332 million yuan, an increase of 7 million yuan compared with the end of 2Q23, mainly testing equipment and accessories; the contract debt was 92 million yuan, which was 16 million yuan less than that at the end of 2Q23. Due to the slow expansion of wafer manufacturing by downstream customers, the delivery of 3Q23 orders has been delayed to a certain extent, but we believe that the company's leading position as a domestic WAT testing machine is less affected, and the long-term market space is still there.
Look forward to 4Q23 and 2024: gradually carry out industrial integration and improve the overall solution capacity. On September 26, the company announced that it planned to buy a 43% stake in Shanghai Yiruixin. Shanghai Ericsson specializes in IC Design for testability (DFT). We believe that this investment is in line with the company's overall development plan to focus on improving the yield of chip manufacturing, and is expected to integrate DFT technology into the company's existing product matrix in the future, thereby improving the company's overall solution capability and expanding the ability to diversify customers.
Profit forecast and valuation
Due to the late delivery of 3Q23 orders, we slightly reduced our 2023 revenue by 6% to 575 million yuan, leaving our profit forecast basically unchanged and our 2024 revenue and net profit forecasts unchanged. We believe that the company's position as the leader in yield-enhancing software and WAT testing machines has not been shaken, and the long-term space remains, so it maintains an outperformance industry rating and a target price of 91.91 yuan (based on the 2026 forward SOTP valuation, the software business 40x Phand E, the hardware business 20x Pmax E, discounted at 10.5% to 2023), which has 6% upside compared to the current price.
Risk
International situation fluctuation and industry fluctuation risk; market competition risk; technological innovation risk.