Core views
In the third quarter of 2023, the company's performance improved marginally. In the third quarter of 2023, the company achieved operating income of 278 million yuan, +4.70% year-on-year, and the year-on-year growth rate corrected for the first time in the year; it realized net profit of 34 million yuan, -4.10% year-on-year, and the decline in growth rate was narrower than in the previous two quarters. The company focuses on R&D, production and sales of consumer electronics protection and functional products. The recent boom in the consumer electronics industry is expected to drive the company's overall performance back up. Furthermore, the company's carbon fiber business has developed rapidly in recent years. With the orderly release of new production capacity, it is expected to become the second growth pole for the company's performance.
occurrences
In 2023Q1-Q3, the company achieved operating income of 705 million yuan, -7.79% year-on-year; realized net profit of 87 million yuan, -5.82% year-on-year; and realized net profit of 78 million yuan, minus 28.22% of the previous year.
In 2023Q3, the company achieved operating income of 278 million yuan, or 4.70% year-on-year; realized net profit of 34 million yuan, -4.10% year-on-year; and realized net profit of 29 million yuan after deduction of net profit from non-return to mother, or -31.91% year-on-year.
Brief review
There was a marginal improvement in performance in the third quarter. The year-on-year growth rate of the company's revenue in the third quarter of 2023 was corrected, and the decline in net profit growth was narrower than in the previous two quarters. The company focuses on R&D, production and sales of protective and functional products in the field of consumer electronics. In 2021, 64.4% of the company's products were used in the personal computer field, and 17.5% in smart phones and peripherals. Currently, the company has established good cooperative relationships with well-known consumer electronics industry companies such as Lenovo Group, Lixun Precision, and Weichuang Capital. Currently, Lenovo is the company's largest customer, and the Lenovo Group contributed 47.3% of the company's revenue in the first half of '22.
The consumer electronics industry is booming, which is expected to drive the company's overall performance back up. The company is deeply involved in the consumer electronics sector. According to TechInsights data, in the personal computer sector, global laptop shipments in the third quarter of 2023 totaled 51.2 million units, a year-on-year decrease of 7%. This is the first time since the first quarter of 2022 that the market decline has slowed to single digits. The slowdown in declining growth may indicate that the worst phase of the market has passed, and the laptop market is slowly recovering. Among them, Lenovo has shipped 12.2 million notebook computers, a year-on-year decrease of 5%. Similarly, according to data from market research agency Canalys, the global smartphone market fell by only 1% year on year in the third quarter of 2023, and the previous decline also improved.
New production capacity in the carbon fiber business will be released in an orderly manner, and future growth can be expected. In the field of notebook computers, carbon fiber used as a backplate material has the characteristics of being lightweight, durable, and strong, which can enhance the competitiveness of laptop products. In 2019, the company entered the field of carbon fiber materials and achieved rapid growth. In 2020, 2021, and January-June 2022, the sales volume of the company's carbon fiber products was 177,700 PCS, 587,300 PCS, 454,200 PCS, respectively. The revenue amounts of carbon fiber products were 25.213 million yuan, 82.736 million yuan and 62.6396 million yuan, respectively. The company's new carbon fiber sheet production capacity is currently expanding in an orderly manner. Currently, the carbon fiber materials produced by the company are mainly used in high-end laptop cases. In the future, in addition to further increasing penetration in the notebook computer field, the company is also actively exploring more application scenarios, which is expected to drive overall performance growth.
Investment suggestions: Considering the recovery in the consumer electronics industry and the carbon fiber business's support for the company's performance, the company's net profit from 2023-2025 is estimated to be 1.48, 2.20, and 293 million yuan respectively, corresponding to PE 35.34, 23.84, and 17.88 times, respectively, giving it a “buy” rating.
Risk analysis
1. Technology and product development quality risks: The company's products are mainly protective and functional products for consumer electronics. The consumer electronics industry has developed rapidly in recent years, and products are rapidly iterating. If the company is unable to grasp market trends and meet the changing needs of customers, it may lead to a decrease in customer recognition and thus affect the company's performance.
2. Market competition increases risk: The rapid development of the consumer electronics industry has provided broad market development space for consumer electronics protective and functional products. In recent years, driven by huge market space, more companies have joined this circuit to compete, leading to increasingly fierce market competition. If future competitors have stronger product competitiveness through technological innovation, the company may face the risk of increased competition in the market.
3. Risk of exchange rate fluctuations: Some of the company's business payments or transactions are settled in US dollars. Fluctuations in the US dollar exchange rate may affect the company's profit level, which in turn has an impact on the company's operating performance. If the US dollar exchange rate fluctuates greatly in the future, it will affect the company's exchange profit and loss, which will have a direct impact on the company's net profit.
4. Sensitivity analysis: If the company's gross margin for 2023-2025 falls by 1 pct from 28.82%, 28.05%, and 28.03%, respectively, then the company's gross profit will drop from 1.48, 2.20, and 293 million yuan to 1.39, 2.07, and 278 million yuan.