Q3 Business improvements have exceeded expectations, and new products are about to be released
In the first three quarters of 2023, the company achieved operating income of 927 million yuan, +1.91% year-on-year, net profit of 169 million yuan, +0.24% year-on-year, 2023Q3's operating income of 345 million yuan, +13.82% year-on-year, and net profit of 63 million yuan, +14.27% year-on-year. Q3 Single quarter revenue hit a record high since listing. The company announced the 2023 equity incentive plan and plans to grant 6.4682 million restricted shares at a grant price of 11.32 yuan/share to 303 people, including core technical personnel. We have raised the company's profit forecast. It is estimated that in 2023-2025, the company's net profit to the mother is 2.44/3.79/539 million yuan (original value was 2.34/3.79/508 million yuan), EPS is 0.60/0.92/1.32 yuan, and the current stock price corresponding to PE is 34.5/22.2/15.6 times. The company's internal cost reduction and efficiency increase drive profitability. The release of new products is expected to open up a new growth curve and maintain the “buy” rating.
Product structure improvements combined with cost reduction and efficiency within the company. Q3 profitability in a single quarter increased month-on-month. The company's gross sales margin for the first three quarters of 2023 was 37.71%, y-0.64pcts, net sales margin was 18.26%, year-on-year -0.28pcts, of which Q3 gross margin was 40.18%, +6.48pcts month-on-month, and Q3 net margin was 18.43%, +6.15pcts month-on-month. The improvement in profit margins may be mainly due to the company's increased customer expansion, increased operating rate, increased revenue share of high-value drill products, and continued internal efforts to reduce costs and increase efficiency, and the period cost rate declined month-on-month. In the future, the company will further increase the degree of factory automation, and profitability is expected to continue to rise.
To increase the production capacity layout of CNC tools, the release of equipment and functional film products is imminent. At the same time, the company issued an announcement on adjusting the internal investment structure of fund-raising projects. Without changing the total investment, the production capacity of CNC tools was adjusted from 1.8 million units/year to 9.6 million units/year. Changes in consumer electronics materials have put forward new requirements for processing tools. With the gradual expansion of production capacity, the company's CNC tool business is expected to experience high growth. The company developed its own products such as intelligent storage equipment for drill needles, CNC tool grinders, and fully automatic grinders, etc., and sold them successfully among clients. At the same time, the company is accelerating the development and marketing of automotive light control films and actively participating in the early development, prototyping and certification of customers. It is expected that batch supply will be achieved as soon as possible, starting a second growth curve.
Risk warning: Production capacity for products such as CNC tools and functional films is falling short of expectations, and the recovery in downstream demand falls short of expectations.