4Q23: The median revenue increased month-on-month. Focus on the 2023 performance forecasts of new product release companies such as L-pamid, which are expected to achieve annual revenue of 5.3 to 570 million yuan (yoy: +33.8% to +74.3%), net profit to mother of -4.25 to -385 million yuan, loss exposure increased year-on-year, after deducting net profit of 4.55 to 415 million yuan. Based on the median forecast, 4Q23 achieved revenue of 152 million yuan (yoy: +54.1%, qoq: +1.2%), net profit attributable to mother of -95 million yuan, a month-on-month loss of 39.67 million yuan, after deducting net profit of non-return to mother of 110 million yuan. 4Q23 Demand in the domestic Android phone market declined compared to the third quarter, but benefiting from increased brand customer penetration and increased customer project shipments, the company's median revenue growth was still achieved month-on-month. The recovery in the mobile phone market in '24 was moderate. We lowered our revenue forecast for 23/24/25 to 5.5/9.2/1.41 billion yuan (original value: 6.03/11.11/1,519 billion yuan). Considering the continuous increase in the company's brand customer penetration rate, the release of new products such as lPAMid is imminent, and is still in the growth stage. We gave 10x 24PS (industry average 6.1x 24PS), with a target price of 20.2 yuan, maintaining a “buy” rating.
4Q23 review: Average revenue achieved month-on-month growth, and inventory impairment accruals decreased significantly. According to BCI data, domestic Android phone shipments increased 12.9% year-on-year in 4Q23, down 6.1% month-on-month.
Against the backdrop of falling demand in the domestic Android phone market, the company's revenue (median value) still achieved month-on-month growth, mainly benefiting from continuous breakthroughs in the expansion of brand customers, and stable shipments from early customer introduction projects. In terms of gross margin, considering that 4G products account for a relatively high proportion of shipments, we expect that 4Q23 will still have some pressure on the company's gross margin. In terms of inventory, the company's inventory continued to decline in the first three quarters of 2023. As of the end of the third quarter, the number of inventory turnover days was 391 days, close to the inventory level at the end of the second quarter of 2022 (385 days). The company expects asset depreciation of 0.05-0.09 billion yuan in 4Q23, a sharp decrease from 3Q23 (3Q23:37 million yuan), and the risk of future inventory impairment is low.
2024 outlook: Continue to increase brand customer penetration and focus on the pace of large-scale mass production of L-pamid. According to Canalys, global smartphone shipments will increase 4% year-on-year in 2024. Demand in the mobile phone market is recovering moderately, but we expect the company's revenue to grow 67% in 2024. The main driving forces include: 1) 3Q23's low frequency and medium- and high-frequency L-PAMID modules have all achieved small-scale mass production, and brand manufacturer verification and introduction are progressing smoothly, and large-scale mass production is expected in 2024; 2) 1H23 launched a new low-voltage version of the 5G L-PAMIF and MMMB PA modules and entered the pre-mass production stage. The performance has improved significantly and is highly competitive, which can help the company strengthen new project cooperation with existing customers, and Further introduce new customers to accelerate market share; 3) The company continues to iterate 4G MMMB PA products and is committed to optimizing cost and product performance. The launch of new products is expected to improve overall gross margin.
Investment recommendation: Target price of 20.2 yuan, given a “buy” rating. We expect the company's revenue to be 5.5/9.2/1.41 billion yuan in 23/24/25, respectively. Considering that the company continues to accelerate brand customer penetration, and that new module products such as L-pamid are about to launch, it is still in a period of rapid growth. We will give 10x 24PS (industry average 6.1x 24PS), target price 20.2 yuan, and a “buy” rating.
Risk warning: Downstream demand is recovering slowly, market competition is intensifying, and technology upgrades and iterations fall short of expectations.