20240426-西牛证券-华显光电-00334.HK-Reversing_from_a_loss_in_2023_1H,_but_investors_may_demand_more_9页_335kb

CDOT (00334.HK) Financial Analysis Summary

Key Performance Drivers:

• Revenue Recovery: CDOT reversed its revenue decline trend in FY 2023, achieving YoY growth in 2023 revenue (RMB 2.6bn, up 8.4% YoY). This was driven by increased sales volume of non-laminated and laminated modules, particularly in the second half of the year due to rebounding smartphone demand.
• Product ASP Increase: Average selling prices (ASP) recovered over FY 2023, reaching RMB 28.5 and RMB 70.4 for non-laminated and laminated modules, respectively. This improvement stemmed from diversification into tablets and smart home devices, supported by customized panel sourcing via the mass-produced T9 Factory from CSOT. CDOT's tablet module sales surged 22.7x YoY in 2024 Q1 (RMB 759.9mn).
• Operational Improvements: Cost control measures helped improve operating profitability (RMB 19mn operating profit) despite margin compression, reversing the net loss incurred in 2023 1H. Reduced CAPEX and cash flow improvements were noted.

Analyst Concerns & Future Outlook:

• Gross Margin Pressure: The gross margin declined to 6.8% in FY 2023, primarily due to product mix shifts favoring lower-margin tablet and smart home device sales. Analysts warn that the low gross margin reduces resilience to market volatility.
• Segment Contributions: While smartphone demand stabilized in 2023, dependency remains high. Tablet and smart home device segments are expected to grow further, potentially accelerating ASP increases to the low teens.
• Competitive Landscape: As the mature TFT LCD market flattens, CDOT relies on horizontal expansion (e.g., new product lines) and hopes for a "driver providing a long-term story" to boost investor confidence.

Investor Views:
CDOT was previously assigned a stock rating of NR (No Rating) with a target price of HK$0.00 due to concerns about sustained gross margin recovery and market maturity. Recent operational improvements are insufficient to sway investor sentiment, which remains cautious.

Risk Factors:

• Declining smartphone shipments risk hampering revenue recovery.
• Potential loss of key customers.
• High sensitivity to market fluctuations due to low profit margins.
• Uncertainty over future development positioning.

Financial Highlights:

• Revenue: YoY growth of 8.4% in FY 2023, though reduced by 55.1% in Q2 2023.
• Margin: Gross margin deteriorated to 6.8% in 2023, reflecting product mix changes.
• Cash Flow: Improved due to lower CAPEX; further lines for tablet modules are planned.

Disclaimer: Summary based on West Bull Securities' 28 Apr 2024 report; all data and analysis in the report may be subject to change.