4Q23: Revenue continued to improve month-on-month. The impairment meter mentioned that the approximate profit loss from R&D investment increased. On January 30, Xinhai Technology released a performance forecast. The company expects to achieve revenue of about 433 million yuan (yoy: -29.90%) in 2023; net profit to mother - about 143 million yuan (2.8 million yuan in '22), net profit from non-attributable net profit of 157 million yuan (-40 million yuan in '22). According to the forecast value, 4Q23 achieved revenue of 149 million yuan (yoy: +13.03%, qoq: +18.29%) and net profit to mother of 54.89 million yuan, all of which increased year-on-month losses. The continuous month-on-month improvement in 4Q23 revenue was mainly due to downstream inventory removal nearing the end, customers picked up goods one after another, and new EC/PD products continued to be released. In 2023, the company calculated a loss of about 27 million yuan due to a drop in inventory prices. Combined with high equity incentive expenses, the profit side's loss increased month-on-month in 4Q23.
We maintain our 24/25 revenue forecast of $635/859 million. Considering the company's successive launches of new products in the PC and automotive fields, revenue is expected to return to high growth after 24 years, giving 10 times 24 PS (comparable to the company Wind's consistent expectation of 6 x 24 PS), corresponding to a target price of 44.7 yuan, maintaining a “buy” rating.
2023 review: Traditional business restoration+PC new product pickup has led to revenue growth. Gross margin has stabilized the consumer electronics industry's inventory situation since the second half of 2023. Shipments from traditional businesses such as the company's 8-digit MCU have been gradually restored, single-section BMS and other analog products have resumed delivery in September, and EC chips and PD protocol chips for the PC market have begun to be launched, driving revenue growth year over month in the fourth quarter. Currently, MCU prices have gradually stabilized, and the company's PC and mobile phone-related products with high gross margins continue to increase as a share of revenue. We expect 4Q23 gross margin to increase slightly month-on-month. Since the company continues to have high R&D expenses in key strategic directions such as BMS, sensor conditioning, PC, and automotive electronics, and the combined equity incentive payments are included in R&D investment, we expect 4Q23's R&D expenses to be high.
2024 outlook: Improve the full signal chain chip product matrix, follow the progress of the PC business. We expect the company's revenue to increase by more than 40% year on year in 2024. By business: 1) Laptop sector: first-generation PD products and first-generation EC products for the commercial market have begun to increase rapidly, second-generation EC products for the consumer market have begun to be imported into leading domestic companies for verification, USB HUB chips and BMS fuel meter chips are being introduced in clients, and the total value of computer peripheral products is expected to increase. 2) Analog signal chain: Large-scale deployment of 2-5 section BMS for drones, power tools, etc. is expected to begin this year, and 12-18 section BMS products that meet ASIL-D levels will be launched in the future. 3) Health Measurement AIoT: As of August of last year, 211 business opportunities from the Hongmeng Smart Link Project have been successfully introduced, enabling OEMs to complete HarmonyOS Connect certification for 93 products, and it is expected to maintain a leading edge for 24 years.
Investment suggestion: The target price is 44.7 yuan. To maintain the “buy” rating, we are optimistic that the company will build a core product matrix around the “analog signal chain+MCU”. As industry sentiment recovers, revenue for 23-25 is expected to be 433/635/859 million yuan, respectively. Considering the company's successive launches of new products in the PC and automotive fields, revenue is expected to return to high growth after 24 years, giving 10 times 24 PS (comparable to the company Wind's consistent expectation of 6 x 24 PS), corresponding to a target price of 44.7 yuan, maintaining a “buy” rating.
Risk warning: New product promotion falls short of expectations, terminal demand recovery falls short of expectations, and gross margin continues to decline.