Performance summary: The company achieved revenue of 1.24 billion yuan in 2022, an increase of 28.4% over the previous year; Guimu's net profit was 26.2 million yuan, a decrease of 43.0% over the previous year.
Shipments of aluminum frames continued to grow, and factors such as rising production capacity and credit impairment affected profits. The company's aluminum frame shipments continued to grow during the reporting period, with a consolidated gross profit margin of 11.8%, a year-on-year decrease of 0.5 pp, and a year-on-month decrease of 1.1 pp.
The main reason for the decline in performance: First, photovoltaic aluminum component projects with an annual output of 100,000 tons were put into operation during the reporting period. Production and sales of photovoltaic aluminum frames increased more than at the beginning of the year. Credit impairment of 16.91 million yuan was calculated in the first quarter of 2023, an increase of 71.0% over the previous year; second, the impact of share payments amortized by equity incentives in the first quarter of 2023; third, it took a certain period of time for the private offering of photovoltaic aluminum component projects to produce 100,000 tons per year in 2022. Production capacity climbed mainly in the first quarter of 2023. The rise in production capacity was basically concentrated in the first quarter of 2023 for fixed assets. Depreciation, intangible Fixed cost expenses such as asset amortization have increased dramatically; fourth, new energy vehicle parts projects are under construction, which also has a certain impact on profits.
It is proposed to set up a subsidiary to lay out production capacity in Southeast Asia, with supporting component manufacturers pointing to the US market. In order to develop overseas markets and meet the needs of the company's international development strategy, the company plans to invest 120 million US dollars of self-financing to establish a subsidiary, Xinbo Hong Kong Co., Ltd., and then use Xinbo Hong Kong Co., Ltd. to invest 50 million US dollars and 70 million US dollars respectively to establish subsidiaries Xinbo New Materials Vietnam Co., Ltd. and Xinbo New Materials Malaysia Co., Ltd. in Vietnam and Malaysia, respectively. Currently, leading component manufacturers such as Longji Green Energy, Jingke Energy, Jingao Technology, Tianhe Solar, and Dongfang Risheng all have module production capacity in Southeast Asia. By building a production base in Southeast Asia, the company can supply aluminum frames to high-priced markets such as the United States and further expand its market share by increasing the production capacity of supporting component factories nearby.
Battery trays are about to be released, and the recycled aluminum project will further reduce production costs. The company plans an annual output of 100,000 tons of new energy vehicle aluminum parts projects and 600,000 tons of recycled aluminum projects. The first phase of the NEV aluminum parts project with a production capacity of 50,000 tons is expected to be mass-produced in June, and the recycled aluminum project is divided into three phases to be put into operation by the end of 23, 24, and 25, respectively. The company has begun sending samples of battery tray products one after another, and is actively promoting verification and factory review work. The recycled aluminum project helps the company guarantee the supply of raw materials and further reduce costs (net profit of more than 500 yuan per ton of recycled aluminum).
Profit forecasts and investment recommendations. The company's 23Q1 shipments continued to grow, and net profit declined due to factors such as rising production capacity, equity incentives, and credit impairment. As new production capacity climbs one after another, profits are expected to recover, and the release of battery tray products is imminent, and the cost of the recycled aluminum project will be further reduced. The company's net profit from 2023 to 2025 is estimated to be 360 million yuan, 7.1 billion yuan, and 1.01 billion yuan respectively, and the corresponding PE is 14.0, 7.1, and 5.0 times, respectively. Maintain a “buy” rating.
Risk warning: Risks such as the rapid rise in the price of aluminum ingots, the replacement of aluminum frames by other products, the construction of new production capacity, and the pace of commissioning falling short of expectations.