In 2023, net profit to mother is forecast to increase 90-110% year-on-year
The company issued a performance forecast: net profit due to mother in 2023 was 144-159 million yuan, up 90-110%, corresponding to 1.51 million yuan/100% increase from the center; deducted non-net profit of 120 to 133 million yuan in 2023, an increase of 80-100%, corresponding to 127 million yuan per centre/same increase of 90%.
The estimated net profit for 4Q23 was 4651-61.63 million yuan, up 448-627%, and 85-145%, corresponding to the core 54.07 million yuan, +538%/+115% YoY; 4Q23 deducted non-net profit of 3566-49 million yuan, an increase of 866-1227%, and 41-94%, corresponding to the core 42.33 million yuan, +1047%/+67% YoY.
Key points of interest
The profit forecast for 4Q23 reached a record high due to multiple factors favorable to commercial investment. By business segment: 1) EGR business: The company's revenue growth in 2023 was mainly from national four non-road machinery and hybrid passenger vehicles. At the same time, it cooperated with Bosch to supply natural gas engine jet rail assemblies to OEMs such as Weichai and Cummins, and initially began supplying EGR system products for heavy natural gas trucks, thereby benefiting from the explosion of the natural gas heavy truck industry (+354% to 152,000 vehicles in 2023). 2) New energy core business: On the industry side, domestic wholesale sales of new energy passenger vehicles increased 36.3% year-on-year to 8.864 million units in 2023. As a client, the company's share of customers from leading foreign electric vehicle companies has increased, and UMC continues to increase, and customers such as Freddy Powers/Star Drive/Jinkang Power have brought new revenue increases. In addition, we expect that some customers may make up for the difference in raw material prices in 2022 and increase profits in 4Q23. 3) Micro Research Precision: Steady growth in performance.
The performance forecast is in line with equity incentive targets, and we are optimistic that the new energy business and heavy natural gas truck business will continue to grow in 2024. In September 2023, the company released a draft equity incentive plan. The performance assessment target is revenue of +50%/+47%/+27% to $17/25/3.2 billion yuan in 2023/2024/2025, net profit +90%/+58%/+33% to 1.4/2.3/30 billion yuan, and the corresponding net interest rate is 8.3%/9.0%/9.4%.
We believe that the forecast profit for 2023 is in line with the equity incentive guidelines, demonstrating the company's strength. Looking ahead, we expect sales of heavy natural gas trucks to continue to rise to 240,000 units in 2024, and sales of new energy passenger vehicles are expected to increase to 12 million units, driving the company's revenue and profit growth. In addition, the company issued an announcement to participate in subscription fund shares and foreign investment. It is optimistic and plans to participate in vehicle and automobile industry chain investment, and has a certain synergy with its main business.
Profit forecasting and valuation
The profit forecast for 2023 remains unchanged. Considering that the heavy gas truck business and the new energy business are still expanding and climbing, the profit forecast for 2024 was lowered by 5.8% to 228 million yuan, and the profit forecast for 2025 was introduced for the first time. Maintain outperforming industry ratings. The current stock price corresponds to 17.3/13.1 times the 2024/2025 P/E, keeping the target price unchanged, and the valuation switched to 2024, corresponding 23.0 times the 2024 P/E, with 33% upside.
risks
Production capacity in the new energy business fell short of expectations, production and sales of heavy natural gas trucks fell short of expectations, and competition in the industry intensified.