LCXX(SZ:000977) GF SECURITIES·2024-04-22 09:01Investment Rating - The report maintains a "Buy" rating for the company, with a target price of 39.13 CNY per share based on a 30x PE ratio for 2024 [4][18]. Core Views - The company reported a revenue of 65.87 billion CNY in 2023, a decrease of 5.4% year-on-year, and a net profit of 1.78 billion CNY, down 14.5% year-on-year. The gross margin and net margin were 10.0% and 2.7%, respectively, both lower than in 2022 [2][9][16]. - The decline in revenue is attributed to fluctuations in AI server sales, significantly impacted by U.S. export control policies on advanced computing products, particularly affecting NVIDIA high-end AI chips used in the company's servers [2][16]. - The company anticipates a recovery in revenue growth in 2024, driven by the introduction of adjusted performance products by NVIDIA and a potential rebound in general server sales as the macroeconomic environment improves [2][18]. Financial Summary - Revenue and Profitability: - 2023 revenue was 65.87 billion CNY, down 5.4% from 2022. The net profit was 1.78 billion CNY, a decrease of 14.5% [3][9]. - The gross margin for 2023 was 10.0%, down 1.13 percentage points from 2022, while the net margin decreased by 0.29 percentage points [2][10][17]. - Quarterly Performance: - In Q4 2023, revenue increased by 5.3% year-on-year to 17.77 billion CNY, with a net profit of 1.00 billion CNY, up 84.5% year-on-year [9][16]. - Product Segmentation: - Server and component business revenue was 65.24 billion CNY in 2023, down 5.5% year-on-year, while IT terminal and components revenue increased by 29.8% to 390 million CNY [10][16]. - Cost Management: - The company reduced sales expenses by 3.6% to 1.45 billion CNY, while management expenses increased by 4.5% to 770 million CNY [10][12]. - Cash Flow: - The net cash flow from operating activities was 520 million CNY, a decrease of 71.3% year-on-year, primarily due to strategic inventory buildup and increased procurement of raw materials [12][21]. Earnings Forecast - The expected EPS for 2024-2026 is projected to be 1.30, 1.48, and 1.61 CNY per share, respectively [18][22].