Net profit to the mother fell by 32.72% in '23. Maintaining the “buy” rating, Zhenlei Technology released its annual report. In 2023, it achieved revenue of 281 million yuan (yoy +15.75%), net profit of 72.484 million yuan (yoy -32.72%), deducting non-net profit of 63.9962 million yuan (yoy -37.26%). Among them, Q4 achieved revenue of 110 million yuan (yoy +18.08%, qoq +86.17%) and net profit to mother of 32.539,800 yuan (yoy -10.38%, qoq +407.62%). We expect the company's 2024-2026 EPS to be 0.81, 1.26, and 1.70 yuan respectively (previous value 2024-2025 1.12 and 1.63 yuan). Comparatively, the company's 24-year Wind unanimously expected an average PE value of 59 times. Considering that the company is the core target of the satellite industry chain, continuous improvement of the product spectrum will significantly increase the supporting value, and the industrial chain position will continue to strengthen. The company will be given 75 times PE in 24 years, with a target price of 60.75 yuan (previous value of 61.6 yuan), maintaining a “buy” rating.

Overall revenue remained stable, and overall gross margin declined

In '23, the company's power management chips achieved revenue of 107 million yuan, up 18.02% year on year, gross profit margin of 84.47%, down 7.19 pct from '22; microsystems and module business achieved revenue of 49 million yuan, up 26.90% year on year, gross profit margin of 64.91%, down 5.52 pct from '22; RF transceiver chips and high-performance AD/DA products achieved revenue of 99 million yuan, down 1.87% year on year, gross profit margin of 93.80%, up 0.44pct from '22; terminal RF front-end chips It achieved revenue of 03 billion yuan, a year-on-year increase of 52.36%, and a gross profit margin of 81.83%, a decrease of 3.09 pct from '22. The company's overall gross margin level was 83.12%, down 4.76pct from '22.

High cost rates lower net profit levels, and R&D investment remains high

The cost rate for the 23-year period of the company was 48.30%, up 11.27pct from the previous year, of which the sales expense ratio was 5.89%, up 1.01pct from the previous year; the management expense ratio was 11.87%, up 1.42pct from the previous year; the R&D expenses increased by 12.34pct over the previous year, and the R&D expenses increased by 59.13%, mainly the development of new products and the iterative improvement of existing products, and the use of various flow film processes. The corresponding increase in the consumption of R&D materials, outsourced processing, etc. The increase in the remuneration of personnel is due to a combination of factors.

The microsystem and module business continues to improve, and AD/DA technology continues to break through in 2023. In 2023, the company continued to focus on innovation in next-generation SIP component technology and microsystem design technology. In addition, some 3D heterogeneous microsystems already have the initial ability to develop mass-produced products; in 2024, the company will begin research and development of mass-produced products for some 3D heterogeneous microsystems and trial promotion in the market. In terms of AD/DA chips, the company has increased investment in high-speed and high-precision AD/DA chips and digital beamforming chips used in emerging fields such as low-orbit commercial satellites and next-generation digital array radars, and has laid out the spectroscopy and serialization of various related chips. Additionally, the company has launched a new one.

The new CX8845 product is leading the 14-bit/4G parameter level to reach the international advanced level, further filling the spectral gap of domestic high-speed and high-precision ADC products, and is expected to fully enjoy the domestic replacement dividends.

Risk warning: Risk of orders falling short of expectations, risk of falling product prices.