3Q23 performance is in line with our expectations
The company announced 1-3Q23 results: revenue of 5.338 billion yuan, up 14.0% year on year; net profit of 359 million yuan, corresponding to profit per share of 1.39 yuan, up 23.3% year on year. Looking at a single quarter, 3Q23's revenue was 1,987 billion yuan, up 29.0% year on year; net profit was 137 million yuan, corresponding to earnings per share of 0.53 yuan, up 45.4% year on year. The performance was in line with our expectations.
There was a decline in gross margin in the third quarter alone. The consolidated gross margin of 1-3Q23 companies was +1.8ppt to 21.2% year on year. Among them, the comprehensive gross margin of the 3Q23 company was 19.4%, -1.9ppt year on year, and -4.7ppt month-on-month, mainly due to changes in the company's product structure.
Internal reforms have brought about improvements in management capacity, and the cost ratio continued to improve during this period. In 3Q23, the company's expense ratio was 11.7%, -0.6ppt year on year. Among them, sales, management, and R&D expense rates were -1.3/-1/-1ppt, respectively. The company's management capacity continued to improve, and the financial expenses rate was +2.9ppt year on year, mainly due to fluctuations in the US dollar to RMB exchange rate, which led to a year-on-year decline in exchange earnings. In 3Q23, the company's net profit margin was +0.8ppt to 6.9% year on year. As of the end of the 3Q23 period, the company's inventory balance was 3.390 billion yuan, an increase of 28 million yuan over the beginning of the year, and contract liabilities of 2,436 million yuan, a decrease of 210 million yuan from the beginning of the year.
Development trends
Demand for forklifts continues to improve, and the company is expected to benefit from the large truck strategy. According to data from the Construction Machinery Association, sales of 100,000 forklifts of various types in September 2023 were up 16.3% year on year, with a year-on-year increase of 19.5% within China and 10.5% year-on-year overseas. The company's forklift revenue mainly comes from Class 8 and Class 3 trucks. In recent years, it has newly entered the Class I and Class II forklift industry. Demand for Class 8 vehicles was weak this year, and the increase in the company's forklift revenue was mainly due to the contribution of Class 1 and 2 vehicles. Looking ahead, the lithium battery transformation trend in the forklift industry has been determined. Considering the obvious advantages of China's industrial chain, overseas companies may choose a business model of seeking OEM cooperation with Chinese companies, and the company started with OEM, so we expect the company to benefit from changes in industry trends.
Intelligent logistics has entered the delivery period, and profitability is expected to improve. We expect that about 70% of the downstream orders of the company's domestic intelligent logistics business come from the lithium battery industry. Looking back, along with the slowdown in the expansion of lithium power plants, we expect that the scale of orders taken by the company's domestic intelligent logistics business may decline, but since the company's on-hand orders are still relatively large, stock orders can still guarantee the company's revenue growth, and we will continue to pay attention to changes in the company's intelligent logistics order structure. The profit margin of the company's intelligent logistics sector is low. In the 1-3 quarter of this year, improvements in the internal governance of the company's smart logistics business led to an increase in profit margins. We expect future business profit margins to continue to increase.
Profit forecasting and valuation
Due to increased profitability brought about by improved management capabilities, we increased our profit in 2023 by 6.6% to 486 million yuan, maintaining our 2024 profit forecast. The current stock price corresponds to 2023/2024 by 10.0 times/9.0 times P/E, maintaining an outperformance of industry ratings and the target price of 25.20 yuan, corresponding to 13.4 times /11.9 times P/E in 2022/2023, with 33% upside.
risks
The penetration rate of electric forklifts fell short of expectations, and the release of orders fell short of expectations.