2023 and 1Q24 results are in line with market expectations

The company announced its 2023 results: revenue of 4.697 billion yuan, a year-on-year decrease of 20.97%; net profit to mother of 48.24 million yuan, corresponding to profit of 0.02 yuan per share, a year-on-year decrease of 89%, in line with market expectations.

The company announced 1Q24 results: revenue of 1,289 billion yuan, an increase of 51.1% year on year; net profit to mother of 30.16 million yuan, which turned a loss into a profit, corresponding to a profit of 0.01 yuan per share, in line with market expectations.

Development trends

High-end CIS chips were shipped in 2023 and 1Q24, and single-chip technology was the first in the market. The mass production and shipment of the company's 32MP image sensor products marks that the high-pixel single-chip integrated technology products independently developed by the company have been recognized by customers. The product positioning has been upgraded from traditional 200-8 megapixel to 32MP and above, providing a strong guarantee for the company to further enter the high-pixel image sensor market. The company announced that based on this, subsequent companies will continue to develop and iterate high-pixel products. According to the first quarterly report announcement, the company's 50MP products have already been mass-produced and shipped for branded phones. We believe that 50MP is expected to become another main product after 32MP. It targets the larger market segment of the mid-range and low-end mobile phone camera market, and is expected to contribute to the company's revenue growth in 24-25 years.

In 2023, the company showed that the driver chip business developed rapidly, and the TDDI market share increased. The company announcement now covers QQVGA to FHD+ resolutions. The company focuses on the application of small to medium displays in mobile phones, wearables, industrial control and household products. According to the company announcement, LCD TDDI products have entered internationally renowned mobile phone brands, and the share of sales has increased markedly. In addition to LCD display driver chips, the company also continues to pay attention to the development of the AMOLED display industry, and the company announced that it will launch AMOLED display driver IC products as soon as possible.

Fund-raising projects have entered mass production, and profits are under pressure in the short term due to depreciation. Since the consolidation of some production lines in mid-2023, the company has gradually accrued depreciation on production lines, which has had a great impact on the company's current profit. The company plans to increase production capacity in this fund-raising project mainly for the production of high-end CIS products. In the future, with the expansion of the high-end CIS product line, orders will continue to increase. We believe that the company's high-end CIS will be enough to consume its own production capacity. Although short-term depreciation puts pressure on profits, we are optimistic that the company's long-term gross margin is expected to recover.

Profit forecasting and valuation

We kept our 2024/2025 revenue forecast unchanged. Taking into account the increase in R&D expenses, we lowered our 2024/2025 net profit by 15.5% and 3.4% to $347 million and $939 million. Considering the increase in the share of the company's high-end products in the future, we will maintain the outperforming industry rating and target price of 21 yuan (corresponding to 58.2 times P/E in 2025). The current stock price corresponds to 45.9 times P/E in 25 years, with 26.6% room for growth.

risks

Demand falls short of expectations, competition intensifies, the volume of high-end products falls short of expectations, and new product development falls short of expectations.