Incident: Hongya CNC disclosed its semi-annual report for 2023. The company achieved revenue of 1,332 billion yuan in the first half of the year, +26.75%, net profit of 308 million yuan, +24.26%, after deducting non-return net profit of 295 million yuan, +58.46% year-on-year. Q2 achieved revenue of 743 million yuan in a single quarter, +46.42% year-on-year, net profit of 185 million yuan, +30.47%, after deducting non-return net profit of 179 million yuan, +104.49% year-on-year. Performance exceeded expectations!
The growth momentum in the first half of the year came mainly from equipment updates for small and medium-sized domestic furniture companies. Since this year, as furniture equipment has entered the renewal cycle, the iterative demand of domestic small and medium-sized furniture enterprises for cost-effective CNC equipment and intelligent production lines has increased markedly. As a leading enterprise, the company, as a leading enterprise, has continuously accumulated technology over the past few years, launched cost-effective digital and intelligent products, captured downstream renewal needs, and achieved a new high in revenue.
Looking at domestic and foreign sales, in the first half of the year, the company's domestic sales were 970 million, +34.2% year-on-year, an increase of 4.1 pcts, reaching 72.7%; export sales were 360 million yuan, +10.3%, a year-on-year decrease of 4.1 pcts to 27.3%. Export sales are basically in line with expectations. Last year, due to a large decline in domestic sales, the share increased significantly. In the long run, the share of around 30% is a reasonable level.
The increase in gross margin was mainly due to lower costs of raw materials and standard parts and a depreciation of the RMB. The company's gross profit margin for the first half of the year was 33.02%, +2.42 pcts year on year, 33.74% in Q2 in a single quarter, +3.05 pcts year on year, and +1.63 pcts over the previous year. The reason for the increase was 1) the cost of raw materials such as steel fell; 2) the company increased its suppliers of standard parts, which increased its bargaining power in comparison; 3) overseas revenue was settled in euros and US dollars, and the exchange rate was favorable to the company in the first half of the year.
The decline in net interest rates was mainly due to high non-economic rates in the same period last year, which still achieved a high increase after deducting non-net interest rates. The company's net interest rate for the first half of the year was 23.20%, year-on-year -2.32 pcts, Q2 in a single quarter, 24.97% year-on-year, -6.82 pcts, and +4.02 pcts month-on-month. In the same period last year, the company received a relocation supplement from Sichuan Danzi, so the net interest rate for the first half of the year after deducting was +4.44 pcts over the same period last year. The sales/management/finance/R&D expense ratio for the first half of the year was 1.44%/3.18%/-0.19%/3.20%, respectively. The total cost rate for the period was 4.43%, and -1.36pcts year-on-year.
Maintain a “Highly Recommended” investment rating. Hongya has benefited from category expansion+globalization+demand automation upgrades. Over the years, it has focused on this industry, and is expected to continue to increase its market share ratio. We have raised our profit forecast and expect revenue to be 2.6 billion dollars in '23, an increase of 21% over the previous year; the net profit for returning to the mother is 550 million, an increase of 20% over the previous year, and the corresponding PE is only 13 times higher. In the context of a favorable policy orientation, it is expected to usher in a double attack on valuation and performance, and maintain strong recommendations!
Risk warning: Demand falls short of expectations, increased competition in the industry, and risk of overcapacity.