occurrences

The company publishes the 2023 Annual Report and the First Quarter 2024 Report.

In 2023, the company achieved operating income of 2,857 billion yuan, +15.08% year on year; realized net profit of 0.14 million yuan, turning loss into profit year on year; realized net profit deducted from non-return to mother of 6073 million yuan, turning loss into profit year on year; and achieved gross sales margin of 19.96%, -2.18 pcts year on year.

Looking at Q4 alone, the company achieved operating income of 1,084 billion yuan, +30.90% year-on-month, +54.89%; realized net profit of 80 million yuan, turning a year-on-year loss into profit, +9120.14% month-on-month; net profit after deducting non-return to mother of 61 million yuan, turning a year-on-year loss into a profit, +1386.38% month-on-month; and gross sales margin of +8.38pcts year-on-year, +2.44pcts month-on-month.

In Q1 2024, the company achieved operating income of 837 million yuan, +84.31% year over month; realized net profit of 0.14 million yuan, turning loss into profit, -82.40% month on month; realized net profit without return to mother of 20 million yuan, turning loss year on year into profit, -67.61% month on month; gross sales margin was 21.26%, +1.47 pcts year on month, -1.42 pcts month on month.

Key points of investment

Smart security and mobile dual-wheel drive companies turned losses into profits in 2023, and Q1 revenue was +84.31% year-on-year.

Adhering to the three-legged development direction of “smart security+smartphone+automotive electronics”, the company achieved total revenue of 2,857 billion yuan in 2023, an increase of 15.08% over the previous year; achieved net profit of 14 million yuan, an increase of 96.965 million yuan over the same period last year, turning a loss into a profit. By business, smart security/smartphones/automotive electronics accounted for 58.49%/31.21%/10.30% of revenue, respectively. Smartphones and automotive electronics grew significantly year over year, yoy +50.40%/30.45%. In the smartphone sector, a number of XS series 50 megapixel products have been mass-produced. These products are mainly used in high-end flagship phones, such as main cameras, wide-angle, telephoto cameras, etc., and the unit price is high, opening up a new growth curve for the company's revenue. At the same time, we will comprehensively deepen cooperation with customers and continue to increase our market share.

In Q1 '24, the company achieved revenue of 837 million yuan, +84.31% year-on-year. In the smart security field, due to market recovery and the company's iterative product performance and competitiveness, product sales increased, leading to an increase in sales revenue; in the smartphone sector, shipments of the company's XS series high-end 50 megapixel products used in flagship mobile phone main cameras, wide-angle, and telephoto lenses increased. Affected by this, the company's revenue in the smartphone sector increased significantly, while cooperation with customers deepened comprehensively, and market share continued to increase. In the smartphone sector, the company has successfully created a second growth curve.

Security mobile phones continue to pick up, smartphone CIS is growing brilliantly, and 50M high-end products contribute to the second growth curve of CIS phones.

1) Smart security: In 2023, the company's smart security industry revenue was 1,671 billion yuan, up 0.41% year on year, accounting for 58.49% of main revenue. In 2023, the company launched the SC880SL, the first 1/1.2" 8MP4K ultra-starlight-level image sensor with a large target surface, which can still achieve excellent night vision imaging results in ultra-low light environments. In addition, the company has also launched several new upgraded AI series CMOS image sensors, which combine the advantages of better night vision full-color imaging, high temperature imaging, and low power consumption performance, which can better empower smart wireless cameras and multi-camera solutions such as home IPC and AIoT terminals. 24Q1 shows that the downstream smart security market has picked up somewhat.

2) Smartphones: The company's CIS products cover the current mainstream needs of the mobile phone market, and the product resolution ranges from 800,000 pixels to 50 megapixels. The company has completed mass production of its XS series 50 megapixel products for cameras such as main cameras, wide-angle, and telephoto cameras in high-end flagship phones, and has opened up a second growth curve for the company's smartphone revenue with its high unit price. In addition, for the mainstream smartphone CIS market, the company is also developing in-depth technical cooperation with domestic fabs, using technological innovations such as single-chip integration to launch more cost-effective high-resolution products that are better suited to the needs of mainstream smartphones.

3) Automotive electronics: In 2023, the company released a new 5MP high-resolution automotive-grade RGB-IR global shutter image sensor, the SC533AT, which mainly brings more accurate and reliable in-flight visual perception capabilities to high-end driver monitoring systems (DMS) and passenger monitoring systems (OMS).

At the same time, the company's automotive CIS products have been mass-produced by major car manufacturers such as BYD, SAIC, Dongfeng Nissan, Great Wall, Ssangyong, Zero Sport, Chery, GAC, Jiangling, and Geely. According to the YOLE report, in 2022, the company already ranked 4th in the world and second in the country in the automotive CIS market.

Profit forecasting

We expect the company to achieve revenue of 4.905/64.12/8.360 billion yuan in 2024-2026, and achieve net profit of 4.53/6.44/840 million yuan. The closing price on May 14, 2024 corresponds to the company's 2024-2026 PE of 39/27/21 times, respectively, maintaining a “buy” rating.

Risk warning

Downstream demand falls short of expectations; progress in product development and introduction falls short of expectations; customer expansion falls short of expectations; market competition intensifies; risk of cost fluctuations.