2024 and 1Q25 results fell short of our expectations
The company announced 2024 results: revenue of 6.383 billion yuan, up 35.90% year on year; net profit to mother of 0.187 billion yuan, up 287.20% year on year. The performance was lower than our expectations. The company also announced 1Q25 results: revenue of 1.524 billion yuan, up 18.21% year on year; net profit to mother of -51.73 million yuan, lower than our expectations (profit of 30.16 million yuan for the same period last year). The reason why the company's performance fell short of expectations was mainly due to fierce market competition, which led to lower sales prices for mid-range and low-end products, compounded by an increase in investment in high-pixel R&D.
Development trends
The mobile phone product structure was upgraded, and high-pixel CIS products continued to be released. In 2024, the company's mobile CIS business achieved revenue of 3.598 billion yuan, a year-on-year increase of 60.44%. According to the announcement, the revenue of 13MP and above pixel products exceeds 1.5 billion yuan, accounting for about 40% of the CIS mobile phone business. Among them, 32MP products have been updated and iterated, and large-scale mass production has been achieved in front of the brand; 50MP products have also been mass-produced and shipped in brand phones, marking that the company's innovative single-chip high-pixel chip integration technology has been further recognized by the market. The company announced the successful mass production of multi-spectral CIS, which can accurately identify spectral information under complex ambient light and enhance color reproduction capabilities. We believe 50MP is expected to become another main product after 32MP, contributing the core driving force to the company's revenue growth for 25 years and beyond.
Non-mobile CIS is blossoming more and expanding new growth points. In 2024, the non-mobile CIS business achieved revenue of 1.426 billion yuan, an increase of 17.82% over the previous year. The company announced that in the field of security, the new 4MP product GC4103 has starlight-level night vision full-color imaging capabilities, and the 8MP product has been mass-produced by brand customers.
In the field of automotive electronics, the company announced that it has completed the development and streaming of the first automotive front assembly CIS. It is expected to be launched on the market in 25 years. The Lingang factory obtained IATF16949 certification, laying the foundation for entering the front assembly market. Furthermore, the company continues to pay attention to the development of emerging markets such as AI smart glasses.
The Lingang factory gradually entered the harvest period, and profits were under pressure in the short term due to depreciation. According to the announcement, the Lingang factory has reached full production and successfully achieved mass production of 8MP, 13MP, and 50MP products. We believe that our own factory can help integrate resources on the chip design side and manufacturing side, improve R&D efficiency, and enhance core competitiveness. However, as factories were converted, depreciation had a certain impact on current profits. The company's overall gross margin in 2024 was 22.79%, a year-on-year decrease of 6.71 ppt. Competition for low-pixel products produced in the early stages is fierce. We are optimistic that in the future, with the release of high-end CIS products, factory profitability will gradually increase, driving the company's overall gross margin to rise.
Profit forecasting and valuation
Due to price competition for low-end products and increased factory depreciation costs, we lowered our 2025 revenue/net profit by 3.0%/49.9% to 8.049/0.349 billion yuan, and introduced a 2026 revenue/net profit forecast of 9.562/0.708 billion yuan for the first time. We maintained our outperforming industry rating and lowered our target price by 6.7% to 14 yuan, corresponding to 51.4 times P/E in 26 years (considering that the company's factory climbed relatively steadily until 26 years, the share of high-end products increased). The current stock price corresponds to 49.6 times P/E in '26, with room for growth of 3.6%.
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.
