Increased R&D investment+share payments affect profits and maintain a “buy” rating
Guilun Electronics released its annual report. In 2023, it achieved revenue of 329 million yuan (yoy +18.07%), net profit to mother of 563.56 million yuan (yoy -225.46%), and deducted non-net profit of 666.56 million yuan (yoy -307.81%).
Among them, Q4 achieved revenue of 107 million yuan (yoy -0.88%, qoq +53.51%) and net profit to mother of 276.39 million yuan (yoy -292.75%, qoq +5.75%). The main reasons for the decline in profits: 1) confirmed share payment costs of 32 million yuan; 2) increased investment in R&D. The company's 2024-2026 EPS is expected to be -0.10, -0.07, and 0.04 yuan respectively. Comparatively, the company Wind agreed to expect an average PS value of 19.3 times. Considering that the company has global competitiveness in terms of international customers, the company was given 21.9 times PS in 24 years, with a target price of 20.88 yuan to maintain a “purchase.”
Seize domestic market opportunities, and design EDA revenue is growing rapidly
In 2023, the company's EDA tool licensing business revenue was 203 million yuan, an increase of 10.9% over the same period. Among them, manufacturing EDA revenue was 100 million yuan, a decrease of 4.1%, and design EDA revenue was 102 million yuan, an increase of 31.2%.
Revenue from modeling software such as infrastructure modeling and radio frequency modeling in manufacturing EDA tools has been growing steadily, and automatic reference (SDEP) software is subject to certain fluctuations in demand from high-end customers. Among design EDA tools, revenue from system-level chip design software, simulation software, and custom circuit design software has increased dramatically. The company seized the favorable opportunity for the development of China's EDA industry. In 2023, the main domestic business revenue was 211 million yuan, up 36.5%, and the overseas market was 117 million yuan, down 4.7%. The domestic market provided an important revenue growth engine for the company. The decline in overseas market revenue was mainly due to the decline in revenue due to the impact of customer demand and the acceptance cycle for technology development solutions.
Customer development results have been shown. Revenue from semiconductor device characteristic testing systems and technology development surged, and semiconductor device characteristic testing systems achieved revenue of 82 million yuan in 2023, an increase of 33.8%. Revenue from 981X series products and semiconductor parameter testers all achieved relatively rapid growth. 981X sales also increased by 33.3%, mainly because the product expanded new customers in overseas markets, and FS Pro sales also increased by 43.3%, mainly due to further increasing the product's coverage of education and research users, opening up new customer types among industrial customers, and also exerting synergy with 981X series products. The technology development solution achieved revenue of 43 million yuan in 2023, an increase of 30.2%. The company achieved significant revenue growth in various development fields of test chip design, wafer testing, SPICE modeling, PDK development, and IP development, laying the foundation for customers to verify and implement application-driven EDA processes and tools.
Increased investment in R&D and continuous improvement of product matrices
In 2023, the company's sales/management/R&D expenses rate was 25.86%/18.72%/71.08%, compared with +3.50pct/+0.20pct/+20.87pct, with a large R&D investment. The company continues to increase investment in R&D, and product maturity is further improved. In addition, the company extends the EDA tool chain through mergers and acquisitions, and the full EDA layout is further improved, which is expected to benefit from improved product capabilities and brand influence in the long term.
Risk warning: R&D results fall short of expectations; market competition intensifies.