Event: The company announced its 2023 three-quarter report. The first three quarters achieved operating income of 2.78 billion yuan, +1.5% year-on-year, net profit of 110 million yuan, +14% year-on-year, and net profit of 64.35 million yuan, minus net profit of 64.35 million yuan, -23% year-on-year.
Among them, Q3 in 2023 achieved operating income of 1.02 billion yuan, +6.4% year-on-year and +6.1% month-on-month; net profit of 71.27 million yuan, +56% year-on-year and +335% month-on-month.
Q3 Performance increased beyond expectations, and profitability increased significantly. In Q3 of 2023, the company's overall gross profit margin was 23.11%, year-on-year +1.44pct, overall net profit margin 7.27%, year-on-year +2.25pct, period expense ratio 16.42%, year-on-year +0.38pct, of which R&D expenses reached 71.79 million, +7.5% year-on-year, R&D expense ratio was 7.05%, and +0.07pct year on year. The company continued to increase R&D investment. Q3 The main reasons for the improvement in profit were due to increased sales revenue, marginal improvements, and VAT plus deductions.
Demand from the downstream consumer electronics industry rebounded, and the MIM sector achieved profit in the third quarter. The Q3 MIM sector achieved profit in a single quarter due to the recovery of the downstream consumer electronics industry and the impact of the increase in folding machine projects for major customers. Sales revenue rebounded steadily. As the first manufacturer to supply folding screen hinge parts for Huawei, the company is gradually shifting from the production of MIM parts to customized development and production of MIM parts plus shaft components. With the recovery in consumer electronics demand, the volume and price of the company's products are expected to rise sharply. Furthermore, in September of this year, Yuanzhi Spark plans to increase its capital by 282 million yuan to hold 15% of the shares in the subsidiary Shanghai Fuchi. After the new investors join the shares, it is beneficial to achieve complementary resource advantages between the two sides, and the company is expected to open up room for growth.
The revenue of the P&S sector has reached an all-time high, and the medium to long term layout of the robotics sector has been deployed. The sales revenue of the Q3 P&S sector reached a high level in the same period in history. Q3 revenue is expected to be about 540 million yuan, an increase of about 15% over the previous month, or benefit from a recovery in demand in downstream sectors such as automobiles and home appliances. The company focuses on developing new fields and enters the field of robot motors through the acquisition of 12% shares of Shenzhen Xiaoxiang Electric Technology Co., Ltd. through joint ventures. The company specializes in axial magnetic flux motors, which are currently mainly used in new automotive transmission systems and thermal management fluid systems, and has broad market prospects in the medium to long term.
With further expansion of production capacity, the SMC sector may maintain high growth. The Q3 SMC segment expects revenue of about 200 million yuan, and revenue for the first three quarters is about 690 million, up 36.8% year on year. Q3 Sales growth has slowed due to inventory removal in the downstream photovoltaic industry. It is expected that the industry will continue to grow in the later stages. In addition, the company has further expanded production capacity, and the construction of the SMC production line at the Ningbo headquarters has achieved initial results. Some high-end SMC products have already been supplied in small batches.
Maintain a “Highly Recommended” investment rating. The company is expected to achieve net profit of 220, 320, and 4.2 billion yuan from 2023-2025, corresponding to a price-earnings ratio of 36/25/19 times, maintaining a “highly recommended” investment rating.
Risk warning: Downstream demand for new energy and consumer electronics falls short of expectations, expansion of new construction projects falls short of expectations, macroeconomic risks, etc.