1-3Q23 performance meets our expectations
The company announced 1-3Q23 results: 1-3Q23 achieved revenue of 1.152 billion yuan, year-on-year + 17.1%, net profit of 145 million yuan, year-on-year + 53.9%, + 15.0%, net profit of 61 million yuan, 28.9%, in line with our expectations.
Profitability optimization, the proportion of interconnection harness may be improved. 1-3Q23 achieved a gross profit margin of 22.5%, a year-on-year + 7.24ppt, a net profit rate of 12.6% and a year-on-year + 3.01ppt, mainly due to a sharp drop in the price of junction box raw materials compared with the previous year, while the price end was relatively stable. 3Q23 has a quarterly gross profit margin of 23.86% and a net profit margin of 13.81%, which increases 2.04/1.49ppt respectively compared with the previous quarter, and its profitability is further improved. We believe that this is mainly due to a further increase in the proportion of revenue from the more profitable interconnection harness business.
During the period, the cost investment increased, and the operating cash flow was slightly under pressure. 1-3Q23 company's annual expense rate is from + 2.96ppt to 8.04%, of which sales / management / R & D / financial expenses are from + 0.08/+1.20/+1.25/+0.43ppt to 0.25% respectively. 3.85% to 0.83%. We believe that the increase in management and sales expense rates compared with the same period last year is affected by the company's withholding share payment. The increase in R & D expenditure rate compared with the same period last year is mainly due to the company's continued promotion of product iterations and new business development. 1-3Q23 company operating cash flow from positive to negative to-103 million yuan, we think that mainly because the company is in a period of scale expansion, need to provide a certain account period to the downstream components, so there is a certain working capital gap.
Trend of development
Junction box business is growing steadily, and it is optimistic that overseas factories will be built to enhance competitiveness. At present, the company has rich reserve capacity, and we believe that the company has established a good cooperative relationship with downstream assembly factories in terms of diode junction box, while the company continues to promote capacity construction in Vietnam. According to the company's September announcement, its Vietnamese wholly-owned grandson company has completed the registration formalities, and we are optimistic that Vietnamese production capacity will be gradually put into production to meet the demand for auxiliary materials of Southeast Asian component factories, thus ensuring the growth of shipments. In terms of product iteration, the company continues to promote the market development of chip junction boxes, intelligent junction boxes already have technical reserves, and we believe that the company also has strong market competitiveness in research and development.
The high growth of interconnection harness business is expected to continue to increase profits. The company's interconnection harness is an uncalibrated product, which is widely used in overseas markets because it can save labor costs. at present, it is mainly used in surface power stations in the United States, and its profitability is higher than that of junction boxes. Benefiting from the starting capacity and policy requirements of surface power stations in the United States, the company's interconnection harness business 2Q23 has started to meet the high growth. We are optimistic that after the drop in the price of components, the demand for overseas surface power stations will be further released, which will lead to the continued high growth of the company's interconnection harness business.
Profit forecast and valuation
Basically maintain the net profit of 2023Universe 2024E at RMB 220x313 million, while the current stock price corresponds to 2023gamma 15x Pmax E in 2024, maintaining an outperformance industry rating and a list price of 56 yuan, corresponding to 22x Pmax E in 2024, which has 41% upside space compared with the current one.
Risk
Lower-than-expected demand, cash flow risk, trade policy risk.
Egret