Profitability is under pressure, and the industrial chain continues to expand
In 2022, the company achieved revenue of 1,044 million yuan/yoy +16.61%; the net profit of the mother was 45 million yuan/yoy -27.99%. The decline in profitability was mainly affected by weak consumption of traditional fuel vehicles, geopolitical conflicts and fluctuations in raw material prices. 2023Q1 achieved revenue of 226 million yuan/yoy -10.67%, and net profit of 19 million yuan/yoy +107.78%. Guimo's net profit increased year-on-year due to a low base. With the extension of the industrial chain, the competitiveness of the company's products is expected to increase. We expect the company's parent EPS to be 1.19/1.62/2.25 yuan respectively in 23-25, and the corresponding PE will be 19/14/10 times. Comparatively, the average PE value of the company in 23 years was 20 times. Considering that it still takes time for the company's gross margin to increase under pressure from traditional fuel vehicle sales, we gave the company 20 times PE in 23 years, corresponding to a target price of 23.8 yuan. The rating was downgraded from “buy” to “increase holdings”.
Revenue continues to be under pressure, and the quality of operations has improved
The company's 2022 Q4 revenue was 231 million yuan/yoy -9.51%; 2023Q1 revenue was 226 million yuan/yoy -10.67%. The continued decline in revenue was mainly due to weak downstream fuel vehicle consumption. Against the backdrop of large fluctuations in raw material prices in 2022, the company raised prices for downstream customers. The average unit price of bearing ferrule products throughout the year was 1.51 yuan/yoy +16.16%. The net operating cash flow of 2022Q4 company was 45 million yuan/yoy +229.93%; the net operating cash flow of 2023Q1 was 29 million yuan/yoy +302.35%, mainly due to the slowdown in the company's revenue growth rate and a sharp reduction in raw material procurement expenses.
Raw material prices rose, downstream demand was weak, and profitability declined under multiple pressures. The company's overall gross margin in 2022 was 12.60% /yoy-3.14pct, and the overall net interest rate was 4.34% /yoy-2.68pct; 2023Q1 gross margin was 12.09% /qoq+0.24pct, and the net interest rate was 8.59% /qoq+6.71 pct. 23Q1 net interest rate increased sharply from month to month mainly due to 22Q4 inventory impairment. The decline in profitability in 2022 was mainly due to: 1) raw material prices rose in the first half of 2022, company price transmission had a certain time lag, raw material prices fell in the second half of the year, and inventory depreciation was calculated; 2) the epidemic and the Russian-Ukrainian geopolitical conflict affected downstream customer demand; 3) the production capacity of fund-raising projects was climbing, dragging down overall profitability; 4) changes in accounting policies, reclassifying freight costs to operating costs.
In the future, as production capacity expands and the above disruptive factors are mitigated, the company's profitability is expected to pick up.
Lay out high-speed forging/heat treatment/fine grinding processes, and customers continue to expand
The 2022 convertible bond raising projects, the “High-speed Forgings Intelligent Manufacturing Project” and the “Bearing Ring Heat Treatment Production Line Construction Project”, will enhance the company's high-speed forging and heat treatment capabilities, reduce outsourcing demand, and are expected to accept more customer orders. The company's active heat treatment and grinding processes are expected to increase after delivery, and product gross margin is expected to increase. In terms of downstream customers, the company's newly established subsidiary is expected to expand into the Japanese market. As product competitiveness increases and customers continue to expand, the company's market share is expected to gradually increase.
Risk warning: industry competition intensifies; downstream demand slows down; raw material prices fluctuate.