The company announced its 23rd annual report, with total revenue of 3.273 billion yuan -7.40% yoy, net profit attributable to mother of 0.25 billion -107.99%, net profit after deducting non-attributable net profit of 444 million yoy -115.98%, gross profit margin of 14.56% yoy -9.29pcts, and net profit margin of -0.76% yoy -9.61 pcts yoy. Our review is as follows:

The pressure on the 23-year performance was mainly due to the downturn in the downstream electronics industry and increased competition, leading to lower prices. The company's PCB sales volume reached 1.264,200 square meters +12.36% year over year, but the main PCB business achieved revenue of 3.136 billion yuan -7.95% year-on-year, mainly due to falling demand from some of the company's main customers, lower than expected increases in factory utilization rate and orders. Combined with the decline in communication product prices, it is estimated that the average price of the company's products was 2479.6 yuan/square meter -18.0% year on year. On the one hand, the loss in '23 was due to a decline in revenue. On the other hand, the company's Dongcheng Phase IV project was in a climbing period. The overall capacity utilization rate was insufficient, and the gross margin of the product suffered huge losses. In terms of business structure, the company continued to adjust the order structure and actively explore new markets for new customers. Orders from core customers in the AI server field were gradually increasing, and the customer matrix in the automotive electronics sector continued to be enriched. The share of orders for servers and automotive electronics increased to 24%/17% respectively in '23. In addition, the company's Dongcheng Phase IV has gradually improved the layout of consumer electronics and optical modules such as AI servers, smart network cards, mini LEDs, etc., and the level of automation has been greatly improved, enhancing product competitiveness and laying the foundation for subsequent rapid growth.

Q4 Revenue picked up year on month, and losses narrowed further. 23Q4 revenue of 882 million yuan +2.67% month-on-month, net profit to mother of 7.35 million yuan, net profit of non-return to mother of 16.19 million yuan, and loss exposure narrowed month-on-month. Gross profit margin 10.07% yoy -13.91 pcts -4.10pcts month-on-month, net profit margin -0.83% yoy -9.80pcts month-on-month +2.54 pcts. The cost rate for the period was 13.94% yoy -2.71 pcts month-on-month -0.86pct.

Looking ahead to 24 years, the company is expected to return to a rapid growth trajectory with strong development in communication networks, AI servers, and automotive electronics. In the field of high-end communication network equipment, the company continues to actively cooperate with leading customers to develop PCB products in application fields such as 5.5G/6G, satellite communication, 800G switches, optical modules, etc., and is expected to achieve mass production in 24 years, which is expected to increase the unit price of the product. In the server field, the company continues to optimize the server product structure and focus on AI server product development. Currently, it has developed many server customers including Amazon. AI supporting motherboards and accelerator card products have entered mass production. With the release of production capacity in Dongcheng Phase IV, AI product revenue is expected to increase Further expansion. In the field of automotive electronics, the company continues to increase investment in dedicated automobile lines, and continues to develop more new technologies in segments such as intelligent driving, power energy, and smart cockpits. With the increase in production capacity in Ji'an and Dongcheng and the introduction of batch orders from more new customers, the scale continues to grow rapidly. Along with the continuous increase in global computing power demand, domestic data center expansion, demand for high-computing power servers, and new platform upgrades, etc., the three-phase automotive trend is evolving at an accelerated pace. The company is expected to benefit from the rapid development of industry segments and the dividends of new production capacity over 24 years.

Maintain an “overweight” investment rating. The company has been deeply involved in communication networks, HPC, and automotive electronics circuits for many years. It has mainstream customer resources and has strong core competitiveness. With the continuous release of new production capacity, it is expected to turn losses into profits in the short term. In the long term, it will continue to benefit from the three main business lines and return to a rapid growth path. In summary, our latest forecast is that the company's total revenue for 24-26 is 39.3/46.4/5.33 billion, and net profit to mother is 1.9/3.6/550 million. The corresponding EPS is 0.22/0.44/0.66 yuan, respectively. Corresponding to the current stock price PE is 41.5/21.1/14.0 times, respectively, maintaining the “increase” investment rating.

Risk warning: Prices of upstream raw materials fluctuate; customer development falls short of expectations; downstream demand falls short of expectations; new production capacity falls short of expectations; industry competition intensifies.