FY1H24's performance fell short of our expectations
The company announced FY1H24 results: revenue of HK$2,753 million, -3.7% yoy; net profit of HK$205 million, -24.3% yoy. The performance fell short of expectations. We judge that it was mainly due to the company's product delivery slowdown, as well as increased capital expenditure, R&D, and personnel investment.
Revenue from the core die-casting machine business declined, and the injection molding machine business stabilized. Looking at it by sector, 1) Die-casting machines:
FY1H24 revenue was HK$1,997 million, -2.6% year on year. We judge that due to macroeconomic and market effects, capital expenses for downstream customers have slowed slightly, and the delivery cycle of most equipment may have been delayed until the second half of the fiscal year. 2) Injection molding machine: FY1H24 has revenue of HK$678 million, +2.7% year-on-year, and FY2H23 +27.5% month-on-month. We judge that the company's injection molding machine business recovered in the first half of fiscal year 23 after being impacted in the second half of fiscal year 24. At the same time, the company has also actively developed various new models such as ELECTRICA series, VARIA series, and VA1000 hydraulic injection molding machines, which have further improved in terms of precision, energy efficiency and intelligence, and gradually expanded into new fields such as automotive zero customers. 3) CNC machining center: FY1H24 revenue was HK$79 million, -47.1% year-on-year. We judge that it was affected by interest rate hikes, geopolitics, etc., and sales in overseas markets fell short of expectations.
Gross margin/operating profit margin -1.3/-2.1ppt year-on-year. The gross profit margin of FY1H24 company was 26.2%, down 1.3ppt from FY1H23 and 0.5ppt from FY2H23. The operating profit margin of FY1H24 company was 9.9%, down 2.1ppt from FY1H23 and 1.1ppt from FY2H23. Specifically, the operating profit margin of die-casting machines/injection molding machines/CNC machining centers was 12.1%/2.8%/-9.1%, respectively, -3.4/-0.9/-21ppt.
Development trends
The orders in hand are quite full, surpassing the 16000T oversized die-casting machine. The company currently has orders of HK$2.9 billion, +9% year-on-year, including HK$2.6 billion for die-casting machines, HK$280 million for injection molding machines, and HK$20 million for CNC machining centers. In addition, at the end of October, the company released the 16000T oversized die-casting machine jointly developed with Hongtu, which we believe demonstrates the company's leading strength in the integrated die-casting business.
Shenzhen has won strong investment and is optimistic about the prospects of the company's core die-casting machine business. On October 24, Lijin announced that Shenzhen Lijin received a capital increase of 1.15 billion yuan from the Advanced Manufacturing Fund. Shenzhen Lijin is mainly the company's die-casting machine assets; on November 29, Lijin once again announced that several potential investors plan to increase capital by 73-780 million yuan.
Profit forecasting and valuation
As equipment delivery fell short of expectations, we lowered our net profit for the 2024/25 fiscal year by 27.2%/33.3% to HK$52.4/625 million. The current stock price corresponds to a price-earnings ratio of 15.0 times /12.6 times in the 2024/2025 fiscal year. To maintain an outperforming industry rating, we simultaneously lowered our target price by 27.3% to HK$7.60, corresponding to a price-earnings ratio of 20 times /16.7 times for the 2024/2025 fiscal year, with a 32.9% increase compared to the current stock price.
risks
The penetration of the integrated die-casting process fell short of expectations; market competition intensified; and the increase in profitability fell short of expectations.