The 2023 Earnings Report Meets Our Expectations
Nanochip released its 2023 performance report. Both operating income and net profit to mother are in line with our expectations:
The company expects to achieve full-year revenue of 1,311 billion yuan (YoY -21.51%), corresponding to 4Q23 single quarter revenue of 310 million yuan (QoQ +11.94%, YoY -21.31%); annual net profit to mother of 236 million yuan (YoY -194.21%), corresponding to 4Q23 single quarter net profit of 15 million yuan (YoY +72.41%, month-on-month reverse loss); it is expected that non-net profit for the whole year will be 322 million yuan, corresponding to 4Q23 single quarter deducted non-net profit of 80.99 million yuan .
Key points of interest
The improvement in the company's profitability in the fourth quarter was further verified. 4Q23 expects to achieve revenue of 310 million yuan (QoQ +11.94%), increasing the month-on-month improvement. The company's revenue in 2023 fell short of the assessment target of the 2022 equity incentive plan. According to the company announcement, the 4Q23 company's share payment expenses surged back to 36 million yuan, and the net profit loss to mother in 4Q23 decreased sequentially after excluding share payment fees. We believe that the reason for the month-on-month improvement in the company's performance in the fourth quarter was mainly due to a recovery in downstream demand, maintaining a high level of prosperity in the automotive electronics sector, compounding the continued release of the company's new products, and improvements on the revenue side.
The recovery in industry sentiment is expected to be compounded by the promotion of the company's new product layout, and the company's performance is expected to improve in 2024. According to the company's announcement, the main reasons for the pressure on 2023 results are 1) the decline in revenue and gross margin due to factors such as macroeconomics and the downturn in the semiconductor cycle combined with downstream customer inventory removal; 2) the company increased investment in technology research and development, and expenses increased during the period; 3) the equity incentive plan. In 2023, the company expects to amortize share payments of 221 million yuan, an increase of 12.39% over the previous year. Looking ahead to 2024, we expect the overall prosperity of the industry to pick up as demand in downstream sectors such as industry gradually bottoms out, overseas manufacturers slow down, and the overall prosperity of the industry is expected to pick up. At the same time, when the company's product layout in the automotive and pan-energy sectors is further improved, the company's profitability is expected to improve.
In the long run, we are optimistic that the company will enhance its long-term competitiveness and achieve continuous growth through new product layout and strengthening technical barriers on the booming circuit. The company focuses on the two major circuits of pan-energy and automotive electronics, and has successively launched new products such as magneto-linear current sensors, intelligent isolated drivers, and LED drivers, which can be widely used in automotive electronics, industrial automation, and photovoltaics. At the same time, the company maintains a high investment in R&D, and is expected to establish differentiated advantages and strengthen product technical barriers in the long term.
Profit forecasting and valuation
Taking into account downstream recovery and the company's cost reduction and efficiency, we adjusted the company's net profit forecast for 2023 from a loss of 272 million yuan to a loss of 236 million yuan, raised the 2024 net profit forecast by 63% to 36 million yuan, and first introduced a net profit forecast of 234 million yuan for the first time to maintain the outperforming industry rating. Considering that there are no significant changes in fundamentals, we maintain the company's target price of 143.59 yuan, corresponding to 40 times P/E in 2027. The current company stock price corresponds to 25 times P/E in 2027, and the target stock price has 23.1% 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.