Introduction to this report:
Lijin Technology's first half of the fiscal year was affected by delays in delivery of oversized die-casting machines, and its performance fell short of expectations. Short-term performance is under pressure, and overseas markets may contribute new growth opportunities.
Summary:
Investment advice: The company's short-term performance is under pressure, and the medium to long term is optimistic that the increase in the penetration rate of integrated die-casting will drive the performance growth of large-scale die-casting machines. Delivery of oversized die-casting machines in the first half of fiscal year 2024 was delayed, and the overall performance of Lijin Technology (the “Company”) was under pressure. As a result, the company's net profit forecast for the 2024-2026 fiscal year was lowered to HK$515 million (-39.6%) /HK$605 million (-45.3%) /HK$681 million (-50.8%). The company's earnings per share forecast for the 2024-2026 fiscal year was lowered to HK$0.374 (-39.6%), HK$0.439 (-45.3%), and HK$0.495 (-50.8%). The company's target price was lowered to HK$7.50, corresponding to 2024-2026 PE by 20.0 times /17.1 times/15.1 times, respectively, and PB in 2024 by 2.1 times, maintaining the increase in holdings rating.
The company's performance for the first half of 2024 fell short of expectations. The company's revenue for the first half of fiscal year 2024 fell 3.7% year on year, and operating profit margin fell to 9.9%, down 2.1pct year on year. Delayed delivery of oversized die-casting machines is dragging down the die-casting machine business. The company lowered the annual delivery guidelines for oversized die-casting machines from 30 units to 22-30 units.
We expect the company's very large die-casting opportunities to be delivered in the second half of the fiscal year. Furthermore, with the improvement of the macro environment, the company's injection molding machine business improved in the first half of fiscal year 2024. We believe that the injection molding machine industry may continue to recover in the second half of fiscal year 2024.
The company's overseas business achieved positive growth. In overseas markets, in the first half of fiscal year 2024, the company's die-casting machine business increased 19% year on year, and the injection molding machine business increased 7% year on year. The company is actively expanding its global sales network and service system, and has successively received equipment orders or intent agreements from local automobile manufacturers in Europe, the United States, Japan, and South Korea, and its share of overseas revenue continues to increase. I am optimistic that the company will open up room for growth in overseas markets.
I am optimistic about the increase in orders for the company's oversized die-casting machines. The company is actively expanding new customers, and in particular has made significant progress in overseas automobile manufacturers. In the first half of fiscal year 2024, the company's oversized die-casting machine business added 3-4 overseas customers and 1-2 domestic customers. I am optimistic about the company's future expansion with other overseas automobile manufacturers, and I am optimistic that the company's new orders will grow.
Risk warning: The penetration rate of integrated die-casting solutions may be lower than expected; market competition may intensify.