Loongson Technology(SH:688047) Southwest Securities·2024-05-09 09:30Investment Rating - The investment rating for the company is "Buy" (maintained) with a current price of 88.23 CNY [1]. Core Views - The company's performance in 2023 was significantly impacted by industry cycles, with a revenue decline of 31.5% to 510 million CNY and a net profit loss of 330 million CNY, representing a 736.6% decrease. However, there are signs of recovery in Q1 2024, with a slight revenue increase of 1.6% [2][3]. - The company is actively expanding its market presence and enhancing its product development, with several new products making progress, which is expected to drive future growth [2][3]. Summary by Sections Financial Performance - In 2023, the company achieved a revenue of 510 million CNY, down 31.5%, and a net profit of -330 million CNY, down 736.6%. Q4 2023 revenue was 110 million CNY, down 56.3%, with a net profit of -120 million CNY, down 475.4%. In Q1 2024, revenue was 120 million CNY, up 1.6%, and net profit was -80 million CNY, down 3.6% [2][3]. - The company's gross margin was 36.1%, down 11.0 percentage points, primarily due to reduced sales volume and pricing pressures. The net margin was -65.2% [2][3]. - R&D expenses increased by 35.7% to 430 million CNY in 2023, reflecting the company's commitment to innovation [2][3]. Product Development - The company launched several new products, including the 3A6000 processor, which matches the performance of Intel's 10th generation Core processors while significantly reducing costs. The 3C6000 has completed tape-out, and the 32-core 3D5000 has completed productization [2][3]. - The company is focusing on the electronic government market and has seen significant revenue growth in server and terminal board sales despite a slowdown in traditional markets [2][3]. Revenue Forecast - Revenue projections for 2024-2026 are 800 million CNY, 1 billion CNY, and 1.3 billion CNY, respectively, with a compound annual growth rate of 37.1%. The net profit is expected to improve significantly, turning positive by 2025 [2][3][9]. - The company anticipates substantial growth in its industrial control and information technology chip segments, with expected order growth rates of 13.0%, 24.9%, and 26.8% for industrial control chips from 2024 to 2026 [7][8]. Valuation Metrics - The company is currently valued at a price-to-sales (P/S) ratio of 69.96, with projections of 44.72, 35.14, and 27.12 for the next three years [10][9]. - The expected earnings per share (EPS) for 2024, 2025, and 2026 are -0.28 CNY, 0.17 CNY, and 0.32 CNY, respectively [9][10]. Market Position - The company is positioned to benefit from the recovery of the domestic market and the introduction of new products, which are expected to enhance its competitive edge in the industry [2][10].