Event: On the evening of January 30, the company released its 2023 annual results forecast. According to the company's announcement, it is expected to achieve operating income of about 42.00 to 5.10 billion yuan in 2023, a year-on-year decrease of about 14.20% to 29.34%; net profit to mother of about 0.48 to 0.72 billion yuan, a year-on-year decrease of about 83.59% to 89.06%; and net profit without return to mother of about 0.56 to 84 million yuan, a year-on-year decrease of about 76.26% to 84.17%.
2023 is a turning point in the company's business, and the production line depreciation meter mentions R&D expenses depressing net profit performance. Looking at 23Q4 alone, the company expects to achieve revenue of about 955 to 1,855 million yuan, a year-on-year change of about -30.44% to 35.11%, and a month-on-month change of about -26.14% to 43.46%. On the profit side, in the 23Q4 single quarter, the company expects to achieve net profit attributable to mother - 0.02 to 022 million yuan, an increase of about 98.29% to 118.80% year on year and a decrease of about 69.85% to 102.74% month on month; net profit without return to mother in the single quarter was 0.88 to 116 million yuan, an increase of about 145.36% to 159.79% year on year, and an increase of about 183.87% to 274.19% month on month. The company's revenue side declined year-on-year, mainly due to the slowdown in demand in the consumer electronics market and the decline in the boom in the mobile phone industry, and shipments of the company's traditional dominant products declined. The decline in the company's profit level is mainly due to the increase in R&D expenses related to the iteration of the company's high-pixel products, depreciation of production lines, and control of the company's pricing strategy as a new entrant. The decline in gross margin affects net profit. 2023 marks a turning point in the company's business. In June 2023, the first batch of production capacity of the company's “12-inch CIS integrated circuit characteristic process R&D and industrialization project” was officially mass-produced, which was another phased result of the company's transformation into FAB-Lite; in December, the company launched two single-chip 50 megapixel products in the world. As the production of the company's new production line gradually rises and the market share of high-end new products increases, the company's performance is expected to accumulate and weaken in the future.
The results of the single-chip high-end CIS blossomed in 2023, and it is expected that 2024 will fully start climbing. Since September 2023, the company's 13 million and 32 megapixel products have gradually been mass-produced, 50 megapixel products have also been shipped in small batches, and shipments of 13 megapixel products and above have been rising steadily. Among them, 50 megapixel products are developed based on single-chip technology, and 0.7 μm products are being verified by customers. The company is optimistic that mass production and shipment can be achieved next year, and the company is also actively developing 50 megapixel products with other specifications. The company hopes to gain at least 30% market share in the high-end product market, which is expected to become a new driving force for the company's future growth.
The Lingang factory was put into operation to start a positive cycle of promoting research through production, and equity incentives showed determination for high-end development. On December 22, Geke's Lingang plant was officially put into operation, marking the company's magnificent transformation to the FAB-Lite model. The construction of the Lingang plant is expected to help the company achieve “leaps and bounds” in process progress, and has the technology to compete with world-class image sensor companies. At this time of transformation, in order to gather the competitiveness of core talents, the company announced the repurchase of the company's shares in May 23 and issued an equity incentive plan in June 23. Using revenue from products with 13 megapixel specifications and above as an incentive assessment target, the company demonstrated its firm determination to advance to mid-range and high-end CIS products.
Investment advice: We are optimistic about the potential of the company's CIS chips to be high-end and the core competitiveness brought by its own fab. The company is expected to achieve revenue of 46.77/62.16/7.566 billion yuan in 23-25 years, and achieve net profit of 0.64/2.90/538 million yuan. With a market value corresponding to the market value on January 31, PE is 664/147/79 times, respectively, maintaining a “buy” rating.
Risk warning: Risk of continued slump in consumer electronics demand, risk of technology iteration, increased risk of competition.