occurrences

The company released the three-quarter report for 2023: The company's revenue for the first three quarters of 2023 was 2,960 billion yuan, down 12.14% from the previous year; net profit attributed/deducted from the mother was 3.34/284 billion yuan, down 37.81%/42.32% from the previous year, respectively. In the third quarter alone, the company achieved revenue of 1,117 billion yuan, an increase of 3.20% over the previous year; net profit attributed/withheld from the mother was 130/114 million yuan, respectively, down 32.46%/37.11% from the previous year.

Profitability declined, and the household engraving machine business improved month-on-month

In terms of profitability, the company's gross margin/net profit margin for the first three quarters of 2023 was 29.86%/11.27%, up or down +0.66/-4.65pct, respectively. Among them, the company's gross margin/net profit margin for the third quarter was 28.74%/11.67%, respectively, down 4.46/6.16pct from the previous year. Among them, the company's household engraving machine achieved a month-on-month improvement in the third quarter. In terms of UDM intelligent manufacturing, the company made new progress in e-cigarettes (cooperation with additional core components and complete machines has now achieved mass production) and e-bikes (multiple projects are currently in the negotiation stage), and the company's performance is expected to improve in the future.

Overall expenses were stable, and exchange earnings declined year over year

In terms of period expenses, the company's sales/management/finance/R&D expenses for the first three quarters of 2023 were 0.58/1, respectively.

89/-0.23/266 million yuan, a year-on-year increase or decrease of 6.38%/1.56%/-84.89%/-4.46%. Sales/management/finance/R&D rates were 1.97%/6.38%/-0.78%/9.00% respectively, up 0.34/0 year on year.

86/3.77/0.72pct; Among them, the increase in financial rates is mainly due to a decrease in exchange earnings in the current period.

The UDM business has a strong foundation, and multiple business segments continue to be integrated at the strategic level of development. The company continues to consolidate the core competitiveness of the UDM business model with R&D as the core. On the one hand, it continues to deepen the big whale swarm strategy, actively guarantee order delivery, speed up project R&D and mass production, and carry out cost reduction and efficiency measures; on the other hand, it vigorously promotes GMP plans, actively cooperates with overseas design companies, builds a global resource pool, and has made progress and breakthroughs in international customer reserves. Looking at business segments, the company insists on multi-sector business integration and development, and is steadily promoting multi-point development in fields such as automotive electronics, health environment, overall solutions for intelligent manufacturing, and smart homes.

Investment advice and profit forecasting

With the advantages of the unique UDM business model, the company has established comprehensive and in-depth strategic partnerships with many internationally renowned manufacturers such as Cricut and Logitech. We are optimistic about the company's steady development in the medium to long term. We expect the company to achieve revenue of 42.04/51.75/6.631 billion yuan in 2023-2025, net profit of 5.47/711/942 million yuan, EPS of 0.70/0.91/1.21 yuan/share, corresponding PE of 24.

94/19.21/14.49 times, maintaining the “buy” rating.

Risk warning

Risk of exchange rate fluctuations, risk of trade friction, shortage of raw materials supply, and risk of price fluctuations