Incidents:
On October 30, 2023, the company released three quarterly reports: the first three quarters of 2023 achieved revenue of 254 million yuan, -26.26% year-on-year; net profit of the mother was 72 million yuan, -43.36% year-on-year. Q3 alone achieved revenue of 82 million yuan, -18.42% year-on-year; net profit of 22 million yuan, net profit of 39.88% year-on-year.
Comment:
Downstream demand for industrial robots is slowing, and short-term performance remains under pressure. ① In the single quarter of 2023Q3, the company's revenue fell 18.42% year on year, net profit was down 39.88% year on year, and profitability declined somewhat, mainly due to the slowdown in downstream demand in the industrial robot industry, declining sales volume of the company's harmonic reducer products, and increased competition. According to data from the National Bureau of Statistics, in July/August/September 2023, China's industrial robot production was 3.43/3.32/361,000 units/set, respectively, -13.30%/-18.60%/-14.30% over the same period last year. From January to September 2023, the cumulative production of industrial robots in China reached 3205,000 units, a slight increase of 0.4% over the previous year. ② The gross profit margin of 2023Q3 company is 40.52%, y-11.15pct; net profit margin is 27.20%, y-8.79pct. From the cost side, the decline in gross margin is mainly due to declining demand and increased competition in the industry. On the cost side, the overall period fee rate was 9.17%, down 4.26pct from the previous year. Looking at the split, the sales/management/R&D/finance expense ratio was 2.81%/7.53%/12.09%/-13.25%, respectively, compared to +1.09pct/+2.65pct/+0.13pct/-8.12pct, mainly due to a large increase in the company's interest income and a sharp drop in the financial expense ratio. ③ Cash flow from operating activities in the first three quarters of 2023 was 91 million yuan, an increase of 173.92% over the previous year, mainly due to a decline in sales volume and a decrease in cash for purchasing goods and receiving labor payments.
Demand in the 3C industry is expected to pick up in the fourth quarter, and we look forward to an improvement in company orders. From January to September 2023, the total amount of fixed asset investment completed in the computer, communications and other electronic equipment manufacturing industries increased by 10.2% year-on-year, and increased by 0.7 pct over the January-August growth rate. We expect demand in the 3C industry to pick up in the fourth quarter. Mainly, Apple, Huawei and other brands will continuously release new iPhone 15 and Mate 60 products. Combined with the “Double 11” approach, sales of 3C products are expected to increase, driving the acceleration of upstream fixed asset investment. Harmonic reducers are small in size and load. 3C is one of the important terminal application areas for industrial robots. We expect the company's orders to improve in the fourth quarter.
The mass production of humanoid robots can be expected, and the large-scale release of harmonic reducers is imminent. On September 25, Tesla announced the latest developments in its Optimus humanoid robot. In the video, it can complete yoga movements, and its ability to operate and control has been greatly improved. We believe that Tesla, as a leading humanoid robot company, is expected to be the first in the industry to achieve a breakthrough in mass production. In addition, domestic humanoid robots are also progressing steadily, and new players continue to enter the market. On October 24, Xiaopeng Motor announced its first humanoid robot, the PX5. It only took 5 months from development to production, achieving a “car+robot” layout for the first time in China. As companies at home and abroad speed up their deployment, the progress of mass production of humanoid robots is worth looking forward to.
The harmonic reducer is one of the core components of the rotating joint of humanoid robots, and the technical route is highly deterministic. According to estimates from our previous robot series report 4, under mass production assumptions, the value of the harmonic reducer in a single robot is expected to reach 9,600 yuan, and there is plenty of room for increment. As a domestic harmonic reducer leader, the company has announced plans to establish a joint venture between Sanhua Intelligent Control and Sanhua Intelligent Control to carry out harmonic reducer related business. We expect the company to benefit from the large-scale release of harmonic speed reducers brought about by mass production of humanoid robots through the stickiness of Sanhua Intelligent Control and Tesla.
Investment advice:
The company's revenue for 2023-2025 is estimated to be 3.8, 5.7 billion yuan, and 7.2 billion yuan, respectively, with year-on-year growth rates of -14.1%, 48.8%, and 26.1% respectively; net profit of 1.1, 1.9, and 230 million yuan respectively; year-on-year growth rates of -31.7%, 75.2%, and 24.4%, corresponding to PE 195, 112, and 90 times, respectively. We have given a target price of 140 yuan for 6 months, corresponding to the 2023 PE 222X valuation, and maintaining the “increased holdings -A” investment rating.
Risk warning: The macroeconomic economy is declining, the manufacturing boom is sluggish, and the willingness to spend capital in industries such as robotics is decreasing; market competition is gradually intensifying; capacity utilization is falling short of expectations; construction progress of fixed increase projects falls short of expectations; estimates are subjective.