Desai Siwei (002920)
Event overview
Desai Siwei recently released its 2023 annual report. In 2023, the company achieved an operating income of 21.908 billion yuan, a year-on-year increase of 46.71%, a net profit of 1.547 billion yuan, a year-on-year increase of 30.57%, and a net profit of 1.467 billion yuan, a year-on-year increase of 41.47%.
Intelligent cockpit and intelligent driving with two-wheel drive, single Q4 gross profit margin was repaired from the previous month.
On the revenue side, thanks to the two-wheel drive of intelligent cockpit and intelligent driving business, the company achieved revenue of 21.908 billion yuan, a year-on-year increase of 46.71%. Among them, 1) the intelligent cockpit business realized revenue of 15.8 billion yuan, up 34% year-on-year, higher than the industry level. We believe that the continuous high growth of cockpit business is mainly due to the volume of new products such as domain controllers and the expansion of overseas customers. 2) The smart driving business realized a revenue of 4.5 billion yuan, a year-on-year increase of 74%, mainly due to the large-scale volume of high-end smart driving.
On the profit side, the company realized a net profit of 1.547 billion yuan, up 30.57% year-on-year, slightly lower than the growth rate of the income side, mainly due to the downstream price pressure transmission and the low gross profit margin (16.2%) of the smart driving business. However, in Q4 alone, the company’s gross profit margin was 21.54%, an increase of 2.83pcts from the previous month, showing an obvious recovery trend. In addition, the scale effect of the company began to appear. Specifically, the company’s management/sales/R&D expense ratio in 2023 was 2.3%/1.4%/9.1%, respectively, which was 0.3pcts/0.2pcts/1.8pcts lower than that in the same period of last year, indicating that the company has passed this expansion stage and started to enter the harvest period.
The annualized sales of new project orders totaled over 24.5 billion, and the smart driving business ushered in an overseas breakthrough.
According to the annual report, the annual sales of new project orders exceeded 24.5 billion yuan in 2023, of which the annual sales orders of new cockpit business projects exceeded 15 billion yuan, and new products such as the fourth-generation cockpit HUD and LCD instruments were designated by the project; The intelligent driving business exceeds 8 billion yuan, and the high-end intelligent driving platform has won new project orders from more than ten car companies, such as Ideality, Guangzhou Automobile Ai ‘an, Geely, Great Wall, Lotus, and Extreme Krypton, which is a strong guarantee for sustained growth in the next year. In addition, the company’s overseas business is progressing smoothly, with revenue of 1.64 billion yuan in 2023, up 48.1% year-on-year, higher than the overall level. It is worth noting that in addition to the cockpit business continuing to receive new orders, the company also obtained the smart driving business project designation of overseas core customers for the first time, and the smart driving business ushered in overseas breakthroughs, and the growth space was further opened.
Investment advice:
The company is the core target of automobile intelligence, with obvious advantages of card position and clear logic of subsequent growth. We are optimistic about its expansion from intelligent cockpit to intelligent driving, and its transformation from automotive electronics supplier to automotive intelligent enabler. We estimate that the company’s revenue in 2024-2026 will be 283.9/354.1/42.26 billion yuan, and the net profit attributable to the mother will be 2141/2860/3782 million yuan, respectively, maintaining the Buy -A investment rating. Due to the company’s leading position in the industry and the long-term space for automotive intelligence, we will give a net profit of 40 times PE in 2024, corresponding to a target price of 154.4 yuan in June.
Risk warning: 1) The risk that the smart car market will not develop as expected; 2) The risk that the supply chain repair is less than expected due to the intensification of the epidemic; 3) The risk of increasing upstream chip shortage; 4) The risk that the company’s intelligent driving business is not progressing as expected; 5) Risk of intensified market competition.
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