Downstream capital expenditure was delayed until the second half of the fiscal year, and revenue declined slightly year over year. The company announced FY23/24 interim results. The company achieved revenue of HK$2,754 million, a decrease of 3.7% during the performance period; achieved gross profit of HK$721 million, a decrease of 8.4%, and gross margin decreased by 1.3 pcts to 26.2% year on year; realized net profit of HK$205 million, a decrease of 24.3%; and net profit margin fell 2.0pcts to 7.5% year on year.
The injection molding machine business rebounded markedly, and delays in delivery of oversized die-casting machines dragged down performance growth. By product, the revenue of the company's die-casting machines/injection molding machines/CNC machining centers during the performance period was HK$19.97/6.78/80 million, respectively, -2.6%/+2.7%/-47.1% year-on-year. The first half of the year was influenced by macroeconomics and markets. The pace of capital expenditure for downstream customers slowed down, the delivery cycle of die-casting machines was delayed, and sector performance growth was under pressure. In terms of the injection molding machine business, as the impact of the epidemic dissipates, demand in downstream markets such as 3C and home appliances has recovered markedly, and die-casting machine revenue has improved markedly, increasing 27.5% over the second half of FY22/23.
Ongoing orders remain strong, and postponed die-casting orders are expected to improve overall performance in the second half of the fiscal year.
According to the company's performance report, the company currently has orders of about HK$2.9 billion, an increase of about 9%. Of these, orders for die-casting machines/injection molding machines/CNC machining centers are HK$26/28/0.2 billion respectively. As demand from downstream markets picks up, delivery plans are progressing on time, and we are optimistic that the company's performance in the second half of the fiscal year will improve.
Die-casting tonnage continues to break through upward, and production capacity construction collaborates with technological progress. In October of this year, the company released the world's first 16000T oversized die-casting unit. The product performance is significantly ahead of competitors. The application covers fields such as large chassis parts and battery pack trays. It can achieve integrated chassis casting for A0-C to SUV-class models, and will expand to A00 class models in the future. The company has now signed a strategic cooperation agreement with Guangdong Hongtu for the 16000T super-large intelligent die-casting unit. The new equipment is expected to be used first in Xiaopeng's new models. In terms of production capacity, according to the company's performance meeting, two new production bases in Hangzhou Bay and Hefei, Anhui will soon be put into operation to meet the increasing demand from customers for oversized die-casting machines.
Profit forecasts and investment ratings. We estimate that the company's net profit for the FY23/24-25/26 fiscal year will be HK$666/8.93/1,125 million (previously HK$796/10.88/HK$1,306 million), corresponding to EPS of HK$0.48/0.65/0.82 per share, respectively. Affected by delivery delays in the first half of the fiscal year, we lowered the company's full-year performance expectations. Considering that the company's on-hand orders are relatively strong, the overall performance in the second half of the fiscal year is still expected to resume high growth with the gradual recovery of the macroeconomic economy and market. Referring to comparable company valuations in the same industry and the valuation differences between Hong Kong stocks and A shares, the company was given 20 times PE valuation unchanged in FY23/24, corresponding to a reasonable target price of HK$9.68 (down 17%), maintaining the “superior market” rating.
Risk warning. Passenger car production and sales fell short of expectations, competition in the industry intensified, and the release of company production capacity fell short of expectations, etc.