Qisda Corp
TWSE:2352
Earnings Call Analysis
Q3-2023 Analysis
Qisda Corp
Investors are greeted with an optimistic message from Qisda Group, a company with a global presence in IT, medical, IoT, smart business solutions, and networking communication. Flourishing since 1984, the Group boasts a compelling history, with a notable workforce exceeding 27,000 employees. Investors would appreciate that despite a challenging landscape, the Group's revenue for the first three quarters of 2023 reached TWD 152.9 billion, showcasing resilience amidst market fluctuations.
Signs of financial fortitude are present as Qisda celebrates a gross margin high of 16.6% for the third quarter, indicative of efficiency and cost management that are at their best in two decades. The Group's dedication to profitability is undeterred by a 3% quarterly dip in revenue, having secured a net profit of TWD 1.2 billion, an uplifting 17% increase. Impressively, this margin growth cushions a 16% year-over-year revenue drop, limiting the corresponding operating income decrease to a mere TWD 230 million. Additionally, earnings per share (EPS) improved to TWD 0.61. This careful navigation through rough seas conveys a message of strategic execution to investors.
Investors would take note of the Group's high value-added (HVA) business, with the medical sector experiencing double-digit growth compared to last year, and Business Solution Group's (BSG) revenue steadily securing an increment. Despite the fall in Network Communication Group's (NCG) revenue, gross margins in this segment ratcheted up both quarter-over-quarter and year-over-year, validating a strategic push toward more profitable operations.
The medical sector stands as a lighthouse of progress. With medical revenue ascending, the Group is purposefully investing in healthcare, emphasizing growth over 10% in the past nine months and deploying noteworthy ventures like the Guangxi Geka Hospital, which is on track to break even considerably faster than its predecessors. Their medical empire, positioning for dominance in China and Southeast Asia, is underpinned by a high entry barrier and considerable revenue, poised to become the most potent amplifier of the Group's value.
A strategic offloading of noncore assets, including the Bank Hong Kong Limited, bolstered finances by NTD 5.34 billion. Corporate restructuring and investments align with efforts to optimize operations and promote smart enterprise solutions and green energy initiatives. Remarkably, the dedication to sustainability echoes loud with 20% carbon reduction targets from the supply chain by 2030, setting sights on RE100 and net zero emissions by 2040 and 2050, respectively. These measures, decorated by numerous awards, establish a compelling narrative of a company committed to long-term value and responsibility.
As eyes turn toward the future, there's a cautious yet hopeful anticipation of a gradual recovery. The Chairman illustrates a fluctuating yet stable performance from the first to the third quarter of the current year, with the fourth quarter eyed for reinvigoration. While the post-pandemic economic rebound is subtle, the Group holds a conservative outlook for significant growth in the next year, anticipating a better but modest climb contingent on global events and market conditions.
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Hello, everyone. Good afternoon. Welcome to Qisda Corporation 2023, the Third Quarter Results Investor Conference. I'm IR of Qisda, Vincent. This conference will be chaired by Chairman, Peter Chen, 'President, Joe Huang; and our CFO, Jasmin Hung; Cochair by GM of each business group, GM of Information Technology Business Group, Daniel Hsueh; GM of Commercial and Industrial Business Group, Yuchin Lin; CM of Medical Devices Business Group; Harry Yang; Chairman of Business Solutions Group, Michael Lee; GM of Networking and Communications Business Group, April Huang.
This conference should take around 1.5 hours. Agenda is as follows. First, Jasmin, our CFO, will bring us the third quarter financial results. Next, Chairman, Peter and President Joe will bring us business update and outlook. Each GM of Business Group will share business highlights. Later, we will enter Q&A session.
Before we commence, we want to remind you to pay attention to the safe harbor notice as in this conference, it contains forward-looking statement. Please take some time to read through the content on Slide 4. Thank you very much. Next, we will hand over the microphone to Jasmine to bring us financial results and highlights.
Hello, everyone, investors, good afternoon. We appreciate you to participate in the third quarter in person investor conference. First, me, Jasmin, will bring you the financial results.
First, we will still go through the introduction of Qisda Group. We were established in 1984. Currently, global presence, we're spanning across IT, medical, IoT smart business solutions and networking communication. Global manufacturing site located in Taiwan, China and Vietnam. We have more than 200 sales offices are in R&D centers, mainly located in Taiwan and China. We have more than 27,000 employees.
In 2022, our revenue reached TWD 239.8 billion. First 3 quarter revenue of this year is TWD 152.9 billion. Revenue breakdown, Asia accounts for 48%, America accounts for 31%, Europe 19% this year. We have won many awards. In 2023, we have won 12 awards of TCSA, 3 awards of AREA. And we have won consecutive 5 years in Asia Best Companies to Work For and 9 award of TSAA.
This is Business Group umbrella. The purple blocks are so-called high value-added businesses. Medical accounts for 12%, reached TWD 18 billion, mainly in medical services, which is what we are promoting to be listed in Hong Kong. The 2 medical centers in Nanjing and Suzhou Medical Centers and equipment and consumables, operating tables, surgical light, ultrasound recently acquired. European MDR certificate, also dialyzer, gained approval in China and entering mass production phase, and BSG accounted for 16%, reached TWD 24.8 billion, mainly located in IT intelligence and OT intelligence service and OMO online/offline integration services.
SCG reached TWD 21.5 billion accounted for 14%. For IT business revenue, we also deploy in high value-added IT sector. The total revenue is TWD 79.5 billion. Others, mainly functional film and battery materials, accounted for 7%. And our key investment, which include Darpan, and this year, we invested in Nobel Baby, which is so-called in drugstore; and Rapid-Tach, low orbit satellite.
Let's enter the third quarter financial results. Let's go through a brief highlights. In the third quarter, our gross margin was 16.6%, rising for 4 consecutive quarters, highest in 20 years on a quarterly basis, up by 2.2 percentage points Y-o-Y, up by 0.3 percentage point Q-o-Q.
Q-o-Q revenue down by 3%. However, net profit attributable to Qisda was TWD 1.2 billion, up by TWD 180 million, up by 17%. EPS NTD 0.61, up by NTD 0.09. Y-o-Y, revenue down by 16%, group margin up by 2.2 percentage points. Operating income margin up by 1.4 percentage points. Net profit of TWD 1.35 billion, up by TWD 560 million, up by 71%. EPS, TWD 0.61. Entity down by 2.62 entity. This is because last year, we enjoyed onetime disposal of nonoperating profits of Banco Hong Kong Limited with a contribution of around TWD 5.3 billion causing the discrepancy.
High value-added business, the third quarter revenue was TWD 24.2 billion, gross margin risen for 2 consecutive quarters and higher than the same period last year. Revenue down by TWD 2.3 billion. It is mainly because of the decline in NCG, revenue down by 24% Q-o-Q. Although revenue went down, however, gross margin grew on Q-o-Q and Y-o-Y basis. However, OP income amount decreased as revenue decreased. As to medical and BSG, revenue remained slightly improved. Profitability continued to grow, especially in Medical. Operating income amount grew in double digit compared to the same period last year.
As to our IT business, the third quarter revenue was TWD 26.6 billion, down by TWD 200 million. QoQ, slightly went down by 1%. However, display revenue grew 5% Q-o-Q. IT original business. The main product is display. This year, revenue grew for 3 consecutive quarters. Gross margin, OP income margin also continued to increase to come back to its growth momentum. As to ITV down by TWD 750 million Q-o-Q, mainly due to the accounting treatment. At the end of June, top view has changed to equity methods from consolidated subsidiary. So we will not include its revenue performance.
For the first 3 quarters, gross margin grew by 2.3 percentage points compared to the same period last year, highest in 20 years. Operating income margin also increased by 0.3 percentage points. Even revenues down by TWD 30.8 billion, down by 17%. However, operating income amount only slightly went down by TWD 230 million. This is benefiting from gross margin, OP income margin grew. So the decline is not as big as revenue.
Let's take a look at consolidated statement of comprehensive income. Revenue, the third quarter revenue reached TWD 50.3 billion, a decrease on a Y-o-Y basis, down by TWD 9.6 billion, mainly because of IT and NCG decline. But we can see gross margin was 16.6%, up by 2.2 percentage point. Operating income was TWD 1.3 billion compared to last year third quarter, up by TWD 0.56 billion.
Last year, we enjoyed disposal of Bank Hong Kong. That's why net non-OP income was different, which lead to net income attributable to Qisda decline was significant, down by TWD 5.1 billion, EPS down by NTD 2.62 on a Y-o-Y basis. Compared to the second quarter, revenue down by TWD 1.7 billion, down by 3% because we are suffering in NCG business for inventory adjustment, but gross margin continued to grow.
Operating income reached TWD 1.35 billion, down by TWD 93 million on a Q-o-Q basis. Even revenue down by TWD 1.7 billion. Net income attributable to Qisda steel went up by TWD 0.17 billion. EPS, up by NTD 0.09. Let's take a look at consolidated statement of comprehensive income year-to-date.
Revenue, TWD 152.9 billion compared to last year, down by TWD 30.7 billion, down by 17%, mainly due to IT business sector decreased by TWD 30 billion, also decline in NCG gross margin, 16.3%, up by 2.3 percentage points Y-o-Y. OP income, TWD 4.1 billion compared to last year, down by TWD 0.23 billion. Revenue down by TWD 30 billion, but OP income only slightly went down by TWD 0.23 billion. This is because of the increasing of gross margin.
Non-OP income. Last year, we enjoyed the contribution of disposal of Bank Hong Kong Limited. That's why the great difference. EPS, NTD 1.3 compared to last year, down by NTD 2.71. Let's take a look at consolidated balance sheet highlights.
The third quarter total asset was TWD 189 billion compared to last year's same period. Last year was TWD 217.5 billion, down by TWD 28.4 billion. Let's take a look at inventory down by TWD 15 billion. Our financial debt went down from 36% to 33%. Total liability went down from 69% to 66% through our assessed arrangement because last year, September, we have experienced disposal of Banco Hong Kong Limited, so the cash level was higher at that time. And right now, we are adjusting the liability and cash level to reduce simultaneously. Let's take a look at inventory level, went up by TWD 2.5 billion Q-on-Q, and this is to prepare for the fourth quarter operation growth, and this is a good phenomenon.
In total, from AR turnover and inventory turnover slightly went up, and this is because of the industrial accumulative effect. As a matter of fact, cash conversion cycle only up by 1 day, which makes no big difference. Let's take a look at financial trend.
Revenue in the 3 quarters of this year located around TWD 50 billion, over TWD 50 billion and last year in the previous quarter located TWD 60 billion. Revenue went down. However, operating income remains around TWD 1.35 billion in the 3 quarter of this year.
In the lower figures, you can see the gross margin has grown from last year the first quarter, 12.9, grew to 16.6 third quarter this year. Although revenue went down significantly, the gross margin went up. So OP income margin slightly growing. As to year-to-date gross margin, OP income margin. In 2018, group margin was 12.4. And at the moment, it is 16.3. as to open income margin impacted by the decline in revenue scale, it is also declining.
For the third quarter Y-o-Y basis financial trend, please refer to the content on Slide 15. For business group trend quarterly basis, let's take a look at high value-added business. Revenue in the third quarter was around TWD 24 billion. Medical revenue grew gradually from TWD 5.1 billion, now we reached 2 consecutive quarter over TWD 6 billion. DSG grew from TWD 7.7 billion, grew to TWD 8.5 billion at the moment. NCG last year fourth quarter reached peak TWD 9.2 billion, suffer from inventory adjustment. So the third quarter of this year, revenue down to TWD 5.9 billion for IT HVA because we have experienced the change of accounting method of top view and also impacted by IT market.
However, IT original, we can see the first quarter has met the trough and gradually recovered to TWD 2.3 billion this year. For IT original, not only revenue went up 3 consecutive quarters, also gross margin, OP margin went up. For financial highlights by business group, gross margin range Y-o-Y, Q-o-Q comparison. Medical and BSG for the gross margin range, remain the same on Y-o-Y and Q-o-Q basis as to NCG, we have mentioned revenue went down.
However, gross margin went up on Y-o-Y and Q-o-Q basis. TVA Y-o-Y went up Q-o-Q remained the same. IT original gross margin compared to last year, at the same time, it went up on a higher scale on Q-o-Q basis remain the same, revenue breakdown. Please take a look at the yellow parts, which is Medical business group ratio has grew from 7% to 12%. We will proceed in investing in medical business group development.
BSG grew from 13% to 17%. And we have also mentioned NCG encountered inventory adjustment. So it has suffered a decline. High value-added revenue accumulated to year-to-date has accounted for 50%, and this is our group's currently listed companies.
Basically, in the IT sector, we're still -- and NCG, we're still suffering from inventory adjustment. So the performance compared to last year, same as other company in this industry. We're experiencing a decline. I will hand over a microphone to our Chairman, Peter Chen.
Okay. Thank you, CFO. From the report, we have seen many data that demonstrate from the first quarter to the third quarter results. I want to express my gratitude to investors' support. Under your support, Qisda Group,had performed pretty good in last year and previous year. EPS NTD 4.2.
However, this year, the first quarter and third quarter, we have been through a struggling year. However, we are not satisfied to our performance. As I have mentioned before, first, we have talked about the entire operation this year. revenue and profitability. We hope to see growth quarter-by-quarter. We have mentioned it in previous investor conference. As to revenue in the third quarter remained flattish to the first quarter. The third quarter was TWD 50.3 billion. The first quarter was TWD 50.4 billion. It is almost the same.
Originally, we want to surpass the revenue in the second quarter, TWD 52.1 billion. And why is the reason we failed to surpass the performance in the second year? As our CFO has said, we have suffered from a decline, a huge decline in NCG, also projector, industrial and commercial use. The business group is CIG.
For those sectors, why we said it brought us an unexpected decline in the third quarter. It's mainly due to this 3-year pandemic era. We have encountered supply chain issue or key component material shortage in different industry, the order fulfill rate is different as to NCG, Bokaro, these world-class companies. had also encounter severe material shortage for projector, commercial and industrial business group is also the same. Before I -- it was mainly DLP, digital lighting processor, which was also facing supply chain gap and deficiency. It also appears double booking and overbooking orders with slow digestion and the outcome had brought us to slow demand and the entire pattern has been put off for display business group.
The second half of last year, we have seen the slow demands. So we begin to digest an inventory level. As to the second quarter, the third quarter of this year, our CFO has reported it has picked up gradually for projector because of the pattern was put off. The revenue decline. NCG revenue also declined. And because of the revenue decline in both business group was significant. So even some IT products such as display, revenue went up, the total revenue still declined.
However, you can see our profitability for EPS. The third quarter was NTD 0.61. For the first half was NTD 0.69. So to add up 2 values, it has reached NTD 1.3. We're still not satisfied with the value, but we will keep being prudent in planning for the fourth quarter and you pay close attention to the fourth quarter development.
In the first half year, we have been observing the pattern of ICT industry, and we expect the second half year performance is to be better than the first half. However, this year, the trend is overruled as to current visibility, the second half should remain the same as the first half, and the performance of the fourth quarter will be close to the second quarter.
So next year, the second half and the first half performance should be really close. The third quarter profitability performance is close to the first half. And of course, the second half performance should be better than the first half. For next year 2024, it might be slightly early to talk about the trend development due to many uncertainties. For example, war between Russia and Ukraine has proceeded for over 1 year. Also, the Israel and Hamas war. It hasn't come to an end. We don't know how long it would last. And these are Black Swan factors, also adding inflammation, reaching the peak and rising interest rate government, from all over the world are still observing, including Taiwan.
So next year, based on current visibility, we boldly assume next year should be better than this year, but the growth should not be significant However, the growing ratio, we remain conservative because we still have to observe the impact of the black swan effect. So next year, we still need to remain prudent in managing the planning of next year to be able to see a promising outcome next year.
So to be optimistic, we assume next year is to be better than this year, but we don't know how much better it would be. And we also have shared with you before, in 2027, last year, fourth quarter and 3 consecutive quarters this year, we have enjoyed revenue ratio accounted for over 50% of total revenue. And our next goal is profit of HVA should be exceeding 50% of total profits. 9, 10 years ago, we began HVA transformation. We want to transform Qisda into a company enjoying 20% to 30% gross margin to break through the traditional production line, only having 1-digit gross margin.
If you take a look at our performance in 2014, the gross margin was around 10%. And the third quarter of this year has reached 16.6%. And of course, with higher gross margin adding healthy strategy and better management, we have better room to pursue better OI, better PAT and to see breakthrough above bottom line.
And of course, our 4 major pillars remain the same, basically. Current business optimization, as mentioned, for medical, we're happy to see in the previous 9 months in the previous 3 quarters. Medical has grown more than 10%. And in post-pandemic era because we were suffering from partial anti-pandemic product slow market such as mask panel solutions. It used to be a strong player. However, through the recovery of hospital services and medical devices and consumables has returned it's normalcy in post-pandemic era.
Our group's distribution medical would account for a higher percentage in hospital operations, we have 2 medical centers, Nanjing Medical Center. And this year, we have passed Grade 3A evaluation. What does it mean? It is like the level of our teaching university. What is like NTU or NCKU University, what's the benefit? It can gain government subsidy. You can also go through clinical trials. And for those devices that need to stay inside human bodies, such as hard stent, it might stay in human body for many years. This is Type 3 equipment and the entire administrative processes clinical trial takes a long time, and our Nanjing Medical center is qualified for such clinical trial. It has reached domestic highest level in hospital in China.
Our Suzhou Medical Center, also heading toward 2 Grade 3 evaluation. We estimate this process to go smoothly. And these has been agree milestone to our hospital operation. And last year, we also invested in Guangxi Geka Hospital. It is next to [indiscernible] Guangxi. This is also a Grade 3 hospital. And the growth pace of this hospital is even faster than the previous 2.
For Nanjing Medical Center, it took around 7 to 8 years to breakeven for Sonjo, it takes 5 to 5.5 years. And for this hospital, it should take around 3.5 years to breakeven. It should be accomplished in the second half of next year. This hospital our stake ratio is around 28%. It should gradually increase. and high chance in the future, we will reach the stake over 15%.
And we began to deploy such management for a hospital. We want to build a medical service group across in Northeast Asia and -- great China due to the high entry barrier, we spent more than 15 years to build a group revenue over $10 billion and a healthy medical service system. Our competitor want to enter this market is not easy. Also, we're not talking about market in Taiwan. It is relatively easy in Taiwan. It is another story to establish hospital operation in China and Southeast Asia, we will proactively deploy in this area, and we hope medical to be the biggest value amplifier in our group.
We have built high entry travel, and we have a great team with great GBA level and we want to expand -- we want to penetrate hospital by hospital. As I have said, due to our accumulative experience, we have enhanced our learning curve. And those are invaluable. The profitability speed of our hospital is improving and to successfully duplicate this experience, it is definitely promising and to be the highest value sector, and our CFO has also reported Overseas IPO application is also under progress, as to acceleration on solution development.
As a matter of fact, in brief, it is AI IoT, AI plus IoT, Internet of Things, including artificial intelligence. It is all about smart related solutions, whether it's component level or software, hardware or domain knowledge such as smart hospital or hospital are all smart hospital at the moment. We welcome all investors if you visit China, please say hello to our CFO and visit our hospital.
The smart hospital we have established is definitely smarter than any hospital in Taiwan. And you might wonder why because of the environment in China, the application in IoT as a world-leading level such as face screaming payment, we applied this strategy in our hospital. You don't need to bring cash for operation just to screen your face, they know who you are and the dock payment directly. Is this approachable in Taiwan? Of course, not.
In Taiwan, you may break traffic rules. If you break red light, you're losing money. If you do so, they will find you for crossing red light or other illegal actions if not only car plate could be recognized, they can recognize even your face. And of course, there are environmental or cybersecurity or personal data different limitations in different locations, we will have different approaches. So this year, our performance is great.
Revenue grew, profitability also grew. This year, the 2 sector remain positive circulation. As to NCG, we have brought many details, so I will not repeat here. Recently, we also deploy many low earth orbit satellite investment national team through Rebittech and Alpha and Hydron. In the future, this should be a main sector, and we should be an important player. And why should we invest in low-orbit satellites because we want to enhance the value to boost gross margin. However, on the space should own the markets.
We want to seize the business opportunity of infrastructure. All above, we want to bring you our observation and market condition, and we anticipate growth on revenue and profitability next year. And this year, we will establish a good foundation for the fourth quarter and to return our revenue, our profitability through the revitalization of industry to go back to our normalcy. And I want to thank you again for your support.
Both on stock value and market condition, we have gained great recognition from all of you. We will put more effort in it. Next, I will hand over to Joe Huang, our President.
Hello, everyone. Good afternoon. Peter has brought us detailed explanation in major 4 pillars. So I will not repeat here. I just want to update 1 point. Our Medical business group enjoyed great performance this year. Accumulative performance in previous quarters grew 20%. This will be our future highlight as well. With the 4 major pillars and of course, we need action. We have done 6 foundations for Qisda value transformation. Among them since last year, for the objective of being lean and focused and organizational optimization. As to being lean and focused, we have disposed of noncore assets.
Last year, we have disposed Bank Hong Kong Limited. It has accomplished 100% equal to delivery and again, about NTD 5.34 billion. And this year, we have also reduced stake in [indiscernible]. Other than that, we also enhanced our investment this year. Last year, we invested in Concor Healthcare, and I will not repeat because I have reported before. And this year, you might see from Press Media, we invested in medical channel did drug stores. This is also our strategy for deploying major health care industry. For our organizational optimization aspect.
Last year, BSG took lead in implementing organizational optimization especially smart enterprise and green energy. And this year, we also have afresh combining with [indiscernible] and breakdown migration from DFI to meta age. And Banco Medical Tech also acquired K2. This is the decision made for organizational optimation. They were made to better adapt business group channel and products with the aim to amplify overall synergy.
As to the third quarter, inventory level reduced NTD 15 billion compared to the same period last year. Market supply and demand has gradually come to a balanced status. Material shortage has no longer exist. The balance between demand and supply has returned to a normal level as to China +1 strategy and migration to high-value products, we will proceed our nonstop effort.
For the 4 quarter outlook, our Chairman has brought us detailed notices regarding the entire market environment. I just want to add some points. the world market is weak. First, China real estate crisis, weak exports, weak domestic demand, in Europe, it is impacted by 2 wars. America, the biggest market. It's also suffering from low budget from the government to keep operation. And enterprises underwent layoff period this year has come back to stability. This year, the only opportunity to grow should locate in United States. In Southeast Asia and India, others are struggling.
For medical devices and hospital operation, the fourth quarter performance of Qisda should continue to grow. The previous 3 quarters of this year, it has grown 20%. We assume a good performance in the fourth year. BSG, due to requirement of digital transformation, it has been growing since last year. It is not growing significantly, but growing stably.
NCG affected by inventory adjustment. The fourth quarter is impacted by high-end switch and low orbit satellite, we still maintain growth momentum. IT sector went down since last year's third quarter met trough in the first quarter of this year. Display has -- the performance of display is growing gradually, and we estimate to have a better fourth quarter than the previous 3 quarters. Projector, the performance went down since this year and inventory level is slightly high we assume to come back the first quarter next year. This is the outlook for the fourth quarter.
And other than business operation effort we have put in Qisda corporation. We also put effort in environment sustainability. We spent lots of efforts and we have gained great results. And this year, in the first half, 7 company has won 13 awards. Please click on the link on this slide for the video.
Other than pursuing sustainability, value and operation, we have to commitment and environment and value ESG, and Qisda has announced at the end of the last year for the goal for 2030 and 2040 and 2050, respectively.
In 2030, we wish 20% carbon deduction from supply chain. In 2040, we hope to reach RE100, which is to adopt reusable energy 100% and reach net 0 emission in 2050. Our Board of Director is also establishing goals for social impact and corporate governance for proactive implementation onward. Based on our effort in persistent, our grand fleet is coming together to make an effort.
In the first and second half of this year, 7 company has won 25 award total this year, which include HR Asia Best Company to Work For Award for 5 consecutive years and AREA awards. And these are great milestones. As to collaborative synergy, we have also won top 100 sustainability model award for 2 consecutive years.
Also our sustainability report won gold award last year. This year, platinum award, and we keep progressing. Okay. As to global ESG project, we will proactively participate other than carbon deduction, also our social liability and enterprise operation, we will keep putting effort.
This brings me to the end of my presentation. Before we enter Q&A session, we will have GM of each business group to give us a briefing. Thank you very much.
Next, we will have GM of each business group, starting from ITG.
Hello, everyone. I'm Daniel Hsueh. I'm responsible for ITG business group. I will bring the third quarter highlight and outlook for the fourth quarter. As to the third quarter, it is to be the peak season for stocking up goods traditionally. We haven't seen a rapid recovery for global display market demand. However, Qisda display sales volume is better than previous quarter and the same period last year.
For the fourth quarter, global display market demand remained flattish and with some uncertainty and our client, our ongoing inventory management at the end of the year and adjusting their demand. However, Qisda display sales volume is expected to grow on Q-o-Q and Y-o-Y basis. Thank you.
Next, we will have GM of CIG to give us a briefing.
Hello, everyone. I am Yuchin Lin. I'm responsible for commercial and industrial business group. For the highlight of the third quarter, the shipment of projector in the third quarter for the high-end devices was weak. For the mid- and low-end devices is in accordance to our expectation. For devices for industrial and commercial use, inventory adjustment, progress of our clients lower than anticipated. However, partial urgent order had been placed. I did not dare to give you forecast, but we will perform our best in fulfilling the urgent order requirements.
For the outlook of the fourth quarter, last year, our client overestimated the market situation because of material deficiency and that caused repetitive orders and the progress of inventory digestion is slower than expected. And for the fourth quarter, high-end projector, the demand remains weak. However, we also have some requirement in tender, and we are working closely with our client to win the tender. In the past 1 to 2 months, we won the order in the format of tender. For commercial and industrial use since last year, October, to February and March this year, we have 1 new project of our clients through R&D and QA process we will enter shipment and fulfill the need of our clients. During the slow market, we will be dedicated to build new growth engine and to win new customers. This is our trajectory. This is my briefing. Thank you very much.
Let's start from the left to the right, let's have Harry, GM of Medical Business Group to give us a briefing.
Hello, everyone. I'm Harry. I'm the GM of Medical Business Group. We are -- President has also mentioned the overall performance of Medical in previous quarter grew 20%. It is outstanding performance, especially in hospital operation. After pandemic era, operation recovered and also we have passed [ great free ] evaluation. We want great impression. The growth would remain stable. The third quarter hospital operation is outstanding. As to medical devices in post-pandemic era, we have in-depth development in overseas markets, especially in Southeast Asia, especially in Thailand. This is the biggest market outside China. We have invested dialysis, surgical lights, ultrasound, consumables and intra-oral scanners. We have great performance in Thailand. Other than Southeast Asia, we also deploy European markets, we have acquired the first MDR certificate in Taiwan. This is very difficult. We spent a lot. We went through a lot of process on our ultrasound product, we want to enter European market. This week, our team visited Germany and has great outcome. This is what I want to share with you outside. Other than China, in Southeast Asia, we also enjoyed great results in India and also European country. And we all pay great attention to hemodialysis. In China, our BenQ Biotech Shanghai Corporation, BBC has acquired certificate and enter mass production phase and because China has centralized procurement strategy. So the entire tender, it will be mandatory to require materials from the same vendor in the supply chain. And it has brought a benefit for us to penetrate into each hospital nationally, this is the benefit, but the downside is the government is controlling the price. The government is not good, but we focus on the volume we want to deploy domestic markets. So this part is according to our original plan. Last, our medical services, you'll pay great attention to our movement on [indiscernible] drug store purchase. The Chinese board deem you referred to #1, either vertically or horizontally. It all means number one. That's why we are dedicated in investing in drug store, but this is just my sense of humor. The meaning of the word refers to number one, [indiscernible] drug store, we have in-depth investment. We enter from emerging stock market to OTC market. It's under application. Through [indiscernible] drug store, we want to deploy the entire medical channels. You may think about it 30, 40 years ago, there are grocery stores everywhere. But nowadays, can you see any grocery stores as 7-Elevens are everywhere. In the future, pharmacies, drug stores are the same. If your scale is not big, it is doomed to fail. So if we apply umbrella collective strength to use the in-depth development of [indiscernible] drugstore to build the overall channel for medical services. And we want to invite you to come to our booth on November 30. This is the biggest expo of ours. We have 15 booths. We have AI new products, new genetic tests and innovative image technology to be exhibited in the expo. And we welcome you. And if you visit us, I will treat you a couple of coffee. Thank you very much.
Let's have April to give us a briefing, GM of our NCG business group.
Hello, everyone. In April, GM of NCG Business Group. As Peter said, each production line, each industry, the market circulation has some gap. As to NCG, we also have discrepancy in production line. First, we observed the consumer products such as IP camera, domestic, this wire or wireless router as the fulfillment becomes stable the adjustment will occur first. And the 1 that appeared the latest for AFA is switch. For switch, at the end of the second quarter of this year, our client entered the inventory adjustment phase. However, due to the time, our orders has long term. But when our client requests to perform inventory adjustment and us as the vendor, we should collaborate with our clients as much as possible. This is why the entire third quarter, we experienced a major adjustment. But we also mentioned gross margin per our adjustment in product portfolio. The gross margin in the third quarter is acceptable. And of course, we anticipate following the revitalization it should come back for this priority. For consumer products, in Qisda display, we have enjoyed slight increasement, and for our business group, we also see this trend in consumer products, such as camera. And we estimate the priority is as the same. The consumer product should pick up and followed by industrial products. So for inventory adjustment, it should take a while as the entire market, major shortage we had anticipated this adjustment to occur. So I think this is a mandatory process. So during the time, we're also proactively deploying in mid long-term growth momentum, including new product and new channel development and product optimization. We're also working on it. And also the manufacturing sites, adjustment and optimization, also the synergy between Alpha and Hydron. And we're waiting for the market to pick up we can further optimize ourselves and provide better performance. And the fourth quarter is to be the peak season. For this adjustment in the third quarter. We, of course, are prudently observing the fourth quarter trend, but we also anticipate the peak season to bring us some growth. Thank you very much.
Okay. Thank you, April. Let's welcome AIoT business group. Michael.
Hello, everyone. Good afternoon. I'm Michael, GM of BSG. The third quarter highlight. The revenue grew on Y-o-Y and Q-o-Q basis. Among them, the third quarter revenue of [indiscernible] has reached highest among the same period in past 10 years. Partner, the third quarter revenue and gross margin grew on Y-o-Y and Q-o-Q basis. For the outlook of the fourth quarter, we focus on 6 major infrastructures. In the past year, we have observed edge to cloud integration and AI computing remain elastic demand as to cybersecurity, smart automation and transportation is also recovering per the inventory adjustment. For the 6 major infrastructure, we remain elastic demand perspective to look forward to next year. We have seen inventory adjustment from our clients and for AI computing and smart automation, the demand should pick up. As to organizational adjustment, as Chou, our President has mentioned, Automation Business Group after adjustment this year, we have 3 major sectors. [indiscernible] is mainly responsible for IT intelligence. It goes to [indiscernible]. So I think next year, we can see the overall impact as to OT, DFI is mainly responsible for OT, combining with [indiscernible] and spiller to provide OT intelligence as to IT plus OT, mainly focused on partner tech. And also we have integrated 4 companies into [indiscernible]. So these 3 areas would be our main focus next year.
Thank you, Michael. So all GM of each business group has reported their performance. As to medical performance, we enjoy great outcome. BSG Also grew steadily. For IT slowly coming back to positive growth. And also our industrial and business group and NCG is suffering from high inventory level, but we believe after inventory digestion, we will come back to normal growth path. And next session, we will enter a Q&A session.
Hello, everyone. I'm Chen Meifen from Yuanta Securities. And we have received a detailed report in each business group. And we also mentioned our manufacturing sites, which include Vietnam in our slides. Could we provide some more thoughts or plans about deployment in Vietnam in the future?
Okay. Thank you. We will have President Chou to answer.
The only major investment located in Vietnam, currently and mainly focus on IT sector. NCG also migrate to Vietnam. These 2 major business group has entered Vietnam. And because of the import tax in America is high, so it has to intervene them. And I believe IT display and also projector will enter Vietnam consecutively.
And other than Vietnam, such as America or Mexico, will we consider that to be another manufacturing site?
At the moment, if any client has proposed any demand, we will work with them as fast as we can. Vietnam is the more practical option. And the skill of Vietnam has reached a reasonable number.
As to dividend payout ratio policy. Do we have some change or some plan for some thoughts on strategy?
And we will have CFO to answer this question.
About dividend payout ratio. And we hope to maintain a stable payout ratio. And we also know that all investors and Qisda stakeholders all anticipate to have a good payout ratio, and we will put effort in that. Everyone pay great attention to this topic and also us, we hope to enjoy a great performance in the fourth quarter, we will put our best efforts. In the past few years, we hope that as much as we earn more, the ratio will be lower. If we are less, the ratio will be higher. This is our consistent approach to return the benefit to our investors. We will do our best to fulfill this need. And we have heard your voice, and thank you very much. And for global disappointment, due to geopolitical issues. Our original manufacturing site in China, and now we also have manufacturing sites in [indiscernible] and it's -- it has reached full capacity. In 2014, when I returned to Qisda, it was only just a few production line, the easy production line stays in Taiwan. And now we have 2 plants in Taiwan, and we have reached full capacity with high ratio manufacturing in Taiwan, especially in medical sectors because those devices manufactured in Taiwan has its premium, it has its own value, met in Taiwan to medical market, we can sell at a higher price to 10% to 20%. And of course, in 2019, we have brought our vendors, Hanoi, and we have acquired more than 1 million square meters and we're the biggest vendor in the same industrial area. And we have bargained and gained grade condition. So those partners who join us in the trip were very pleasant the price was only less than 1/3 to the current price. And from 2019 to 2023, if you have money, you may not be able to buy great area. So luckily, we have enjoyed early deployments. We run the plant, we established the plant and move in with the highest efficiency mold. We enter mass production phase in 4 months and build up the plant in a year. It is close to the scale of our plant in Suzhou, 800 acres. Our productivity is definitely sufficient and also in accordance to the arrangement of China Plus One. And in Taiwan, if we also have concern, we also have arrangement in Vietnam. Per our past experience, centralized manufacturer would enjoy the best cost effect. Now we have other strategies such as distributing risk globally for local manufacturer. But in the past, we have proved that manufacturing to be distributed in each country is a correct strategy. And at the end of the day, there's only 1 principal would remain accurate. If you centralize your manufacturer momentum, you will enjoy the lowest cost. Under this principle, we want to in accordance with our clients' need or even stay ahead of our clients' requirements. In 2020, the first year of pandemic, we have entered massive production on February 28. In the past years, we have hurried our client to check our plants to acknowledge our plans and place more order. We locate near Hanoi, located in the Hanan province. This is the best location, the big private company in IT industry also entered Vietnam. And most of them arrived later than us. So we enjoy early deployment and many clients we rushed them to place order in Vietnam. NCG is the business group that proactively deploy this sector import tax to America is 25%. So we enjoyed the most direct contribution in this deployment. Someone has to pay for the tax. So Hydron Alpha are very active in this deployment. Hydron has removed their manufacturing site to [indiscernible] 2 to 3 years ago entirely. So around Hanoi, many Chinese enterprise or companies from other countries had arrived in Hanoi. So I estimate in the future 10 years, the entire Hanoi, especially Northern Vietnam will become a world-class manufacturing site in ICT and the speed will be very fast. And this is also what I want to share with all of you. We have enjoyed advanced deployment. We have done very early and very fast. We're always ahead of our clients' need to fulfill our clients' requirements. And I believe in the future, we will speed up the need to amplify the effect. Do you have other questions?
Do we have other questions? If you need more time to organize your thoughts, I will add some point to what Peter just said. In Vietnam, this is our major investment due to the trade war between China and America issued last for a longer period for the investment in Vietnam. This is our major investment. In the past, trade wars we have experienced many of them. And other than China manufacturing sites and of course, headquarter located in Taiwan. We have also invested in Malaysia, Mexico, Wells and Czech Republic and even Daniel, GM of ITC even visited Brazil, and we almost invested there. And our final decision is to hire local vendors. So in the trend of global trade. We are prudently responding to long-term and short-term needs from our clients. We have to evaluate clients' needs and what we can do for our clients. So this is what I want to share. Also, we will be prudently evaluate the investment in our future projects, and we will definitely fulfill our clients' need. Thank you.
We have also seen many of our investors pay great attention to our hospital operation. I will give you a brief report in 2016 4th quarter until today, it has enjoying its profits in hospital operation, we spent 1.5 years to turn loss to profits. And I have mentioned the entry barrier is really high. We have to build a hospital and build up the medical team and to build up the reputation and maintain health operation to breakeven and enjoy profit we have come a long way. And I have a mission for hospital operation first to reach #1 in private hospital in China. In China, there are public and private hospital accounted for 80%. And for a general perspective, people think public hospital is better than private hospital. The quality of physicians is better in public hospital. But I can guarantee you, at the end of the day, the performance of private hospital is definitely going to be better than public hospital. In Taiwan, we don't really differentiate public or private hospital. For example, Changan University Hospital, NTU Hospital, China Medical University Hospital. And among the 3 top hospitals, we have 2 private hospitals. So in Taiwan, we have overturned the general perception. But in China, it hasn't come to this breakthrough. So we hope as an owner of private hospital next year, with the third-party evaluation, we can reach number 1 in China. And currently, we have reached top 3 in China. It is already very outstanding. And the gap between the goal we want to reach is getting smaller and how to accomplish the goal. With the outlook, we also have to have a winning strategy. And first, we have to design our hospital per patient center strategy. This makes a great difference. For example, if you have to visit 2 departments, you don't have to go to a different department by yourself. We have professional staff to lead you to the location to smooth the process of visiting the hospital. If you have ever experienced high-end health check process, some hospital in Taiwan, the design is not patient-centered is very inconvenient for patients, and we have to get a number and the feeling is not great. It feels like you are [indiscernible] on production line. The most hospital in Taiwan, it is patient-centered. You will have an exclusive medical care professional to walk you through different departments, and you are already suffer in your illness. And of course, you don't want your mood to be impacted. So this is our core design.
And the second goal is to highlight Taiwanese service. And service is like an intangible assets. We know it, but it's not necessary, we can do it. We all enjoy traveling in Japan, right, because we can enjoy the polite services. They bow at 90 degrees. Even if the bus has travel too far, far away. They're still buying until they are out of your site. They are very polite providing their services and we all enjoy it. Can we do that? Not really. And relatively comparing the service level in China and in Taiwan, we're still better than them. And this is our advantage. And we should highlight the exquisite service in hospital. After I take over I visited lobby, the large lobby. I walk around and I've found some issues to be improved. The very high counter, almost blocked the site of the staff. So immediately, I bring the highchair. And also keep 2 on-site staff and to remove that to provide services to our patients as if 5-star hotel management Chief physicians should be in suit with necklace to allow our patients to experience the kind attitude from our doctor. Some doctors are kind and will ask you what is wrong with you. What made you feel uncomfortable with that attitude, that make our patient feels better. So the differences in feelings, this Taiwanese style services is our highlight.
And the third highlight is smart hospital. And as I have reported, since we are automation, high-tech company, we should perform different operation, we should focus on smart hospital. Since our patients enter our parking lot until they paid off and leave, they can experience high-level smart hospital services. which is totally different from general services and many actions from physicians or health care personnel are intelligent process so they can put effort in providing services to our patients.
Next is the management perspective. Our manager can monitor through Internet and are aware of the effect of smart hospital to enhance the differences between us and other competitors. And due to the AIoT environment in China, we can use the advantage. This is also important.
And the fourth item, since we are a Taiwan founded hospital, we should establish a platform for cross straight medical services for medical technology exchange. We will invite Taiwanese doctor to visit China in each quarter to operate for difficult symptoms. To visit for a week, Taiwanese doctor can work in China and establish reputation also to boost discussion across street. This could highlight why we should define ourselves as Taiwan-founded hospital, thank you hospital to become a so-called a domestic private hospital management #1 place.
Last year, revenue exceed 10 billion. This year, the growing speed will be very fast. We'll enjoy 10% to 20% growth for profitability, it's also growing rapidly. We are entering the second phase. We have around 2,500 bed per day, 1,500 bed in Nanjing, 1,000 beds in Suzhou, and both entered second phase. And recently, we have buildings to officially operate. This is very outstanding. And the entire bed number should multiple 2, which is 5,000 bed. In [indiscernible], it has around 4,000 beds to give you this number for your reference. And the third investment located in Guangxi [indiscernible]. We're also looking forward to initiate the first hospital in Southeast Asia. If the first hospital enjoys a successful outcome, we can further expand and build the so-called across Southeast Asia and Great China hospital. We are confident in this growth.
It takes around 7 to 8 years to break even for Nanjing, Suzhou around 5 years, and the third hospital should break even around 3.5 years. Most importantly, because we have the medical team already, you might ask why located in [indiscernible] because the distance to Hanoi is only 300 kilometers. You can clock in and clock out in 1 day. I always joke around about the idea of opening a hospital and having a temple, they are similar. It is magnificent to build a temple. And how busy it is, it depends on what spirits you worship. And if you aim at, let's call niche market, then you will only enjoy a smaller target. Your audience scale is smaller. And what is the spirit as the metaphor to hospital, this is people's opinion, people's thoughts. Some doctors enjoy great reputation, some hospital [indiscernible] reputation. And through referral, we will attract more patients. And I believe this is how most hospital manage their operation. So hospital operation is very difficult. And we will continue to put effort for this principle.
Okay. So we have mentioned Hospital in China and hospital in Taiwan are different. Taiwan hospital cannot go public. And in China, they can and we are undergoing the application process. If you're enjoying great management, you have fulfilled the principal and criteria then you can be listed in overseas market just as a private sector. That's why I said the entire group has 2 major pillar to proceed. But to enlarge the gap to be ahead of other companies we definitely need to focus on medical development and hospital operation. Hospital has the greatest entry barrier. You can see ITC sector, every company is trying to do medical business, but no one is there to enter a hospital operation. This is not easy. So we will speed up to enlarge the gap and hoping to enjoy the advantagement that we created, the profit we created and to sustainably develop in this sector and to return the benefit to all of our investors.
Do we have any other questions? Do you have any questions? If not, our investor conference should end here, and we appreciate all investors assistance and recognition and your support. We want to express our gratitude, and we will keep putting effort to break through the struggling environment and to bring the good performance in revenue and profitability. Thank you very much.
Thank you very much for participating in third quarter investor conference of 2023. We will upload audio and video documents after the conference. Thank you very much.