The company released its third quarter report in 2023. In 2023, Q1-Q3 achieved revenue of 1.41 billion yuan, year-on-year + 207.59%, net profit of 103 million yuan, year-on-year + 6.84%, deduction of non-return net profit of 80 million yuan, year-on-year + 6.99%, Q3 company realized revenue of 464 million yuan, year-on-year + 173.21%, net profit of 42 million yuan, year-on-year-23.26%, deduction of non-parent net profit of 28 million yuan,-24.64%. In the Q3 quarter of 2023, the company's gross margin is 17.30% (month-on-month + 0.45pct) and net profit rate is 8.06% (month-on-month ratio + 3.75pct). The improvement of the profit margin of the company is mainly due to the improvement of the capacity utilization of the consumer electronics business of Yada, the smooth climbing of the new production line, the gradual embodiment of income, the increase of gross profit margin, the decrease of expense rate and the increase of net profit under the background of scale effect. The company's performance is in line with our expectations, and the future volume of the company's business such as data center power supply and site energy power supply is expected to usher in explosive growth in performance and successfully build a power platform enterprise.
Sawing business: product structure upgrading & collaborative Maitson & strong exports to ensure a further increase in market share.
(1) there is room to increase market share: in 2021, the sales volume of bimetal band saw blades accounts for about 25% of the domestic market, ranking first in China and the top three in the world, but the share of Longtou market in mature markets such as Europe, the United States and Japan is more than 50%. Under the background of the gradual transfer of global production capacity to China, the company, as the leader of China, relies on the advantages of first mover, channel, product quality and cost performance. There is still much room for improvement in the market share.
(2) Product structure upgrading: the company's product structure has been continuously optimized, and the proportion of middle and high-end products has continued to improve. In the first half of this year, middle and high-end products accounted for 51% of sawing revenue, accounting for + 2pct, of which the proportion of cemented carbide band saw blades increased by 3pct; the proportion of broadband saw blades increased 4pct. The gross profit margin of the company's high-speed steel bimetal band saw blade is close to 40%, and that of cemented carbide band saw blade is more than 50%. With the upgrading of the product structure, the company's profitability is expected to be further improved.
(3) Collaborative Maitsen: in September last year, the company wholly acquired Maitsen and integrated and empowered Maitsen in the aspects of production capacity layout, manufacturing capacity, marketing network, supply chain management, technology research and development. Maitsen achieved revenue of 50 million yuan in the first half of this year, an increase of 41% over the same period last year.
(4) strong export: the company began to export bimetal band saw blades in 2007, which is the earliest enterprise in China to achieve batch export.
In 2018, the company strategically invested in AKG, a famous German company, established a base for radiation in Europe and the United States, and established an Indian Sun Company in 2019 to expand the "Belt and Road Initiative" market. At present, the company has established cooperative relations with dealers in more than 50 countries and regions around the world, the global layout is emerging, and the export foundation is solid. In the first half of this year, export revenue was 95 million yuan, + 16% compared with the same period last year, an increase close to 1pct. In addition, the company's export gross profit margin is higher than the domestic gross profit margin, with the increase in the proportion of export business, the company's band saw blade business can still maintain a high profit level.
Yada: obvious manufacturing advantages, looking forward to the rapid expansion of the "new" power business. Founded in Hong Kong in 1971, with a brand history of 50 years, Yada was once a wholly owned subsidiary of Emerson, the leader in the global power industry, and an excellent manufacturing platform for domestic power supply. Its customers are widely distributed in consumer electronics, semiconductor equipment, communications, manufacturing, data center and medical fields, with deep technology reserves and product production capacity, including Huawei, Apple Inc, Hewlett-Packard, American Advanced Energy and so on.
(1) Consumer electronics power supply: at the bottom of the consumer electronics cycle in the first half of this year, the industry inventory level remains high, the company is based on the major customer strategy, with the recovery of the industry, the launch of new products by major customers and the end of inventory cleanup, the company gradually recovered in the second half of the year, capacity utilization and profitability ushered in an improvement.
(2) "new" power supply: relying on the foundation of Yada's leading power manufacturing platform, the company builds a high-power power research and development team, actively expands the opportunities of high-power power industry, and creates a full range of power supply business. Taking the "new" power supply as an important development direction, the company vigorously expands the product lines of new energy power supply, charging pile, data center power supply, site energy power supply and so on. Based on the construction of AIGC and Huawei computing center, China has ushered in the era of big computing, and the company's data center power business is expected to benefit deeply. The company is still in the initial investment period from 0 to 1, which requires more expenses, depreciation and amortization of fixed assets, so profitability is under short-term pressure. By the end of the third quarter of this year, the company's projects under construction increased by 859% compared with the same period last year, and increased by 43% compared with the previous year, which means that the company is rapidly promoting the construction of a "new" power production line. In the future, with the orderly release of the company's production capacity and the delivery of orders in hand, the profit situation will continue to improve, and it is expected to meet the performance volume next year and the year after next.
Investment suggestion: we expect the company to achieve a net profit of 1.6,2.5 and 350 million yuan from 2023 to 2025, an increase of 23%, 57% and 40% over the same period last year, corresponding to PE of 38.9X, 24.8X and 17.7x. The main sawing industry of the company is growing steadily, and Yada has excellent manufacturing capacity, which is expected to build a leading power platform enterprise in China and maintain its "buy" rating.
Risk hint: sawing business downstream market demand is not as expected, power business expansion is not as expected.