Incidents:
1. The company released its 2023 annual report: In 2023, the company achieved revenue of 32.066 billion yuan (year-on-year decrease of 11.45%), achieved net profit of 3.287 billion yuan (year-on-year decrease of 34.41%), and gross profit margin of 21.34% (year-on-year decrease of 2.66pct); among them, the 2023Q4 company achieved revenue of 11.610 billion yuan in a single quarter and achieved net profit of 1,443 billion yuan.
2. The company released its report for the first quarter of 2024:2024Q1 achieved revenue of 6.687 billion yuan (year-on-year increase of 0.29%, decrease of 42.41% month-on-month) and realized net profit of 497 million yuan (year-on-year increase of 18.81% and decrease of 65.56% month-on-month).
Comment:
The 23-year results were under pressure, and the 24Q1 results showed a steady year-on-year increase. Companies in the PCB industry were under pressure in 2023. Prismark counted that the global output value of the PCB industry fell 15% year on year in 2023. Judging from IDC terminal product sales, global mobile phone shipments in 2023 decreased by 3.43% year on year; tablets decreased by 20.51% year on year; and laptop computers decreased by 12.74% year on year. The company's performance in 2023 was clearly affected by industry fluctuations, mainly due to price fluctuations, increased process complexity for new products, increased R&D expenses, and reduced exchange earnings. By business, in 2023, the company's communications products business achieved revenue of 23.513 billion yuan (up 3.7% year on year), gross profit margin of 21.08% (year-on-year decrease of 0.96pct); consumer electronics business achieved revenue of 7.975 billion yuan (year-on-year decrease of 39.59%), gross profit margin 22.65% (year-on-year decrease of 4.84pct); and automotive and server board business achieved revenue of 539 million yuan (year-on-year increase of 71.45%). In terms of market share, the company's global market share remained at 7% in 2023, ranking first in the world for 7 consecutive years. At the same time, the global soft board market share also increased year-on-year.
The 24-year business is expected to blossom more. In terms of product reserves, the company already has technical capabilities for optical module products. As the demand for AI servers increases, the company can also develop in the field of optical modules. At the product level, in recent years, the company has continued to develop new products and technologies to accelerate the deployment of AR/VR, AI servers, and smart car markets while maintaining the advantages of communication products and consumer electronics industries. In the AR/VR field, the company has now become a supplier of mainstream products at home and abroad. In the automotive sector, the company has mass-produced and supplied FPC batteries, radar operation boards, and domain controller products used in battery modules, and lidar boards already have technical reserves and begun sample certification.
In the server sector, in the face of growing demand for emerging AI servers, the company continues to technically improve its thick HDI capabilities, and has now entered the world-renowned server supply chain. With the subsequent release of production capacity at the Thai factory, the company's server business is expected to benefit from AI industry trends and grow rapidly.
Maintain a “buy” rating. Considering that the company's downstream demand fell short of expectations, we lowered the 24-25 net profit forecast to the mother of RMB 3.49/4.028 billion (down ratio: 38.01%/36.00%), and the net profit to mother for 26 years was 4.658 billion yuan, corresponding to the current PE valuation of 16x/14x/12x, respectively. Pengding Holdings is a leading global software and hard board company. As downstream demand gradually recovers and new businesses such as automobiles, servers, and AR/VR continue to be developed, we are optimistic about the company's long-term development and maintain a “buy” rating.
Risk warning: Downstream demand falls short of expected risk, customer expansion falls short of expected risk, industry competition increases risk.