The company predicts net profit attributable to mother in 2023 of RMB 262-332 million, exceeding market expectations. It is estimated that net profit attributable to shareholders of listed companies for the whole year will be RMB 262-332 million (median value of RMB 297 million), down 62-70% year on year; net profit after deducting non-recurring profit and loss will be RMB 186-256 million (median value of RMB 221 million), a year-on-year decrease of 70-78%. The company's net profit exceeded market expectations. We believe it was mainly due to the continuous expansion of the company's product matrix and the recovery of consumer electronics. In addition, non-recurring profit and loss also had an impact on net profit.
Key points of interest
The company's profitability was gradually restored, and 4Q23 profit increased significantly. According to the company's forecast estimates, the 4Q23 median net profit of the company was 155 million yuan, corresponding to a 196% month-on-month increase; the median net profit after deducting non-return to mother was 127 million yuan, corresponding to an increase of 184% month-on-month. The company expects the impact of non-recurring profit and loss on net profit in 2023 to be about 76.5 million yuan. We believe that considering the company's continuous introduction of new products combined with product structure optimization, the company's gross margin is expected to remain stable, and at the same time, the company's profit margin is expected to recover further as demand such as downstream consumption picks up.
Downstream demand is still structurally divided, and demand for consumer electronics such as mobile phones has clearly recovered. Demand for the analog chip downstream industry, communications, etc. was weak in 2023, while consumer electronics, represented by mobile phones, took the lead in recovering, helping the company's performance grow. According to Counterpoint data, China's smartphone sales increased 6.6% year on year in 4Q23; according to IDC data, China's wearable market shipments increased 7.5% year on year in 3Q23, with smart watches/bracelets/earphones increasing 5.5/2.2/9.8% year over year. Considering the recovery progress of various downstream application scenarios, we expect industry demand to still show structural differentiation in 2024. The consumer product recovery trend is expected to continue in the first half of the year, and demand from industrial and other sectors is expected to pick up in the second half of the year.
Maintaining a high level of investment in R&D, the launch of new products is expected to accelerate. The company maintains high R&D investment. R&D expenses for the first three quarters of 2023 were 550 million yuan, an increase of 25.04% over the previous year, accounting for 29.25% of revenue. We expect the company to maintain high R&D investment in the future, and the number of product numbers is expected to increase rapidly. According to the company's official account, in the second half of 2023, the company successively launched various new products such as ADC/DACs, linear voltage regulators, level converters, and gate level drivers. There are many types of analog chip products, and the breadth of the product line is an important competitive advantage for analog chip companies. We believe that the company's continuous expansion of the product catalog and optimization of the product structure will help the company establish a competitive advantage, help the company expand its customers and increase its market share globally.
Profit forecasting and valuation
We basically kept the company's 2023/2024 revenue and 2024 net profit forecast unchanged. Considering the continued recovery in downstream consumer demand, we raised the company's net profit for 2023 by 21.7% to 276 million yuan, and first introduced a profit forecast of 765 million yuan for the first time to maintain the outperforming industry rating. We maintain the company's target price of 99.59 yuan, corresponding to 45 times PE in 2026. The current company stock price corresponds to 23 times PE in 2026, and the target stock price has 64.5% room to rise compared to the current stock price.
risks
Product development falls short of expectations; domestic substitution falls short of expectations; industry competition intensifies.