The company recently released its three-quarter report for 2023: in the first three quarters, the company achieved revenue of 337 million yuan, a year-on-year increase of 24.56%, net profit of 1,15872 million yuan, a year-on-year decrease of 46.28%, and net profit of 3.2585 million yuan after deduction, a year-on-year decrease of 70.21%. Our comments on this are as follows:
Key points of investment
Gross margin increased steadily quarter by quarter, waiting for an inflection point in performance. The company achieved revenue of 337 million yuan in the first three quarters, an increase of 24.56% over the previous year, a year-on-year increase of 24.56%, a year-on-year net profit of 1,15872 million yuan, a year-on-year decrease of 46.28%, and net profit of 3.2585 million yuan after deduction, a year-on-year decrease of 70.21%. The increase in revenue and the decline in net profit were mainly due to the decline in gross margin. The company's gross margin for the first three quarters was 46.25%, down 3.89pct from the previous year. Among them, the third quarter achieved revenue of 119 million yuan, a year-on-year increase of 18.92%, net profit of 4.8818 million yuan, a year-on-year increase of 74.45%, and a significant recovery in performance. The sales/management/R&D/finance expense ratio for the first three quarters was 15.74%/10.62%/16.67%/3.38%, respectively, with year-on-year changes of -0.27/-0.21/-1.42/+0.25pct. The company's period expense ratio was 46.42%, down 1.66pct year on year. The company's gross margin for the first two and third quarters was 40.87%/44.72%/51.36%, respectively, showing a trend of increasing quarter by quarter, and an inflection point in performance is expected.
The leading domestic audio and video control equipment and solution provider company was founded in 2011. It is a leading provider of professional audio and video control equipment and solutions in China. Since its establishment for more than ten years, the company has always focused on the design, development, production and sales of professional audio and video control equipment. The main business covers display control products, including splicing processing, seat collaboration, matrix switching, edge integration, management platforms, central control, etc., which are widely used in multimedia video scenarios such as command and control centers, conference rooms and commercial applications in various social industries, and eventually applied to the government , national defense, emergency management, energy, transportation, finance, exhibition, radio, television, meteorology and other industries.
Self-developed chips enhance the competitiveness of enterprises, and equity incentives demonstrate confidence. The company has always attached special importance to scientific research and development. It has 2 software and hardware R&D centers in Beijing and Wuhan, and a chip R&D base in Hefei, and has a total of 93 authorized patents. In recent years, due to factors such as the international situation and exchange rate fluctuations, raw chips have always been an unstable factor. The company made a special public offering of convertible corporate bonds in 2020 to raise capital to focus on investing in the development of professional video and audio processing ASIC chips. After 3 years of hard work, the ASIC chip developed independently by the company was delivered to the fab in early August. On the one hand, after the chip is successfully implemented, it can effectively reduce the company's procurement costs, maintain the stability of raw materials, and increase the gross profit margin of the company's products; on the other hand, the chip can also be put on the market, increase new revenue channels, and enhance the company's market competitiveness. Furthermore, self-developed chips also better meet the requirements of Party, government, and military users for autonomous and controllable localization, and further enhance the market competitiveness of the company's products.
In May 2023, the company launched an employee stock ownership plan and a stock option plan. Among them, 1) the participants in the employee stock ownership plan were no more than 199 people, including directors and supervisors, etc., and the stock source was the repurchased stock, no more than 3.34 million shares, and the price was 11.97 yuan/share; 2) stock options were granted to 221 technical backbone people. The stock source was targeted issuance, and the number of stock options was 32.44 million shares. The exercise price was 18.03 yuan/share. The performance assessment of the two plans is the same. Among them, the 2023 performance assessment is based on 2022 revenue or net profit, and the revenue or net profit growth rate in 2023 is not less than 50%/or 150%; only one of the two conditions is satisfied. The 2024 performance assessment is based on 2022 revenue or net profit, and the 2024 revenue or net profit growth rate is not less than 100% and/or 200%. It is enough to meet one of the two conditions. Employee shareholding and stock options bind the interests of the company's core employees, which is conducive to the company's long-term development. At the same time, the high growth in performance assessment shows full confidence in the company's future development.
Profit forecasting
We are optimistic about the recovery of the company's downstream demand and the recovery in performance after compounding self-developed chips. It is predicted that the company's net profit for 2023-2025 will be 0.48, 0.93, 115 million yuan, and EPS of 0.26, 0.50, and 0.62 yuan respectively. The current stock price corresponding to PE is 91, 46, and 38 times, respectively, covering the first time, giving the company a “buy” investment rating.
Risk warning
Risk of macroeconomic fluctuations, risk of chip flow falling short of expectations, risk of increased industry competition, risk of downstream demand falling short of expectations, risk of employee shareholding and equity incentives falling short of expectations, risk of fluctuations in raw material prices, etc.