Incidents:
On January 27, 2024, the company released the 2023 performance forecast. In 2023, the company expects to achieve operating income of 683 million yuan, a decrease of 18.64% over the same period of the previous year; net profit due to mother is expected to be 73.3772 million yuan, a decrease of 58.22% compared to the same period of the previous year; and net profit deducted from non-return to mother is 61.7417 million yuan, a decrease of 60.74% over the same period of the previous year.
Demand for high-speed communication connectors is weak, and Q4 has achieved a steady month-on-month recovery:
Affected by the overall macroeconomy in 2023, demand in the communications market declined, while downstream terminals were out of stock, the company's high-speed communication connector business demand weakened, and communication connector revenue declined; in addition, competition in the NEV connector market intensified, and the company's cost pressure was high.
In 2023, the company expects to achieve operating income of 683 million yuan, a decrease of 18.64% over the same period of the previous year; net profit due to mother is expected to be 73.3772 million yuan, a decrease of 58.22% compared to the same period of the previous year; and net profit deducted from non-return to mother is 61.7417 million yuan, a decrease of 60.74% over the same period of the previous year. Since Q4, direct customer demand has gradually increased, sales revenue has increased month-on-month, and the decline in net profit for the whole year was narrower than the net profit decline in the previous three quarters. Q4 In a single quarter, the company expects to achieve operating income of 192 million yuan, up 6.08% year on year and 20.8% month on month; it is expected to achieve net profit of 17.3446 million yuan, down 45.88% year on year and up 116.56% month on month.
Deeply involved in the field of communication connectors, future performance is expected to benefit from industry growth momentum. According to the company's announcement, with years of technology accumulation, the company already has strong R&D strength and large production capacity scale to match customers in the connector field with products with high precision and stable quality. As the demand for large-scale GPU clusters increases, artificial intelligence poses huge challenges to the connector industry. In particular, in terms of signal density, signal integrity, including heat dissipation and power consumption, connectors are the key to making full use of AI computing power efficiency and breaking interconnection bottlenecks. Therefore, in the future, high-speed transmission will develop in the direction of “56G-112G-224G”. The communication connector components currently produced by the company are mainly used in large-scale data storage and exchange equipment such as communication base stations, servers, and data centers to achieve high-speed signal transmission. Based on the AI background, the company is currently cooperating with customers to continuously develop a series of new products such as QSFP-DD 112G/OSFP-DD/OSFP to expand the communications product market and enhance the company's core competitiveness. Future performance is expected to rebound from the industry's growth momentum.
Vigorously expand the NEV connector market with high-quality customer resources:
The Passenger Transport Federation predicts that from 2023 to 2028, the domestic NEV penetration rate is expected to increase from 36% to 70%, and the share of smart cars is expected to increase from 33% to 80%. The company's automotive connector products include control system connectors and components, high voltage interlock connectors, wire harness connectors, high voltage connectors, electronic control connectors, etc. In 2023, while optimizing and developing existing products such as electronic control and motor modules, the company is also gradually developing new products in BMS, such as modular water cooling plates and precision structural parts. On the customer side, the company continues to deepen cooperation with existing customers such as BYD, China Changan, Nandu Power, Honeycomb Energy, Fuao Auto, and Rosenborg. Based on existing processes, the number of mass-produced projects has gradually increased; at the same time, it has continuously increased the development of new customers, and successfully developed new customers such as FAW, Sai Chuan Electronics, and Tongyu Auto in 2023.
Investment advice:
The company focuses on the R&D, production and sales of connectors, and has long-term and stable cooperative relationships with well-known companies in the industry. We expect the company's revenue from 2023 to 2025 to be 6.83/11.86/1,731 billion yuan respectively, net profit to mother of 0.70/2.04/313 million yuan, and corresponding EPS of 0.71/2.05/3.15 yuan respectively. We gave the company a target price of 47.15 yuan for 6 months, which is equivalent to 23 times PE in 2024, maintaining a “buy-A” investment rating.
Risk warning: macroeconomic and downstream industry fluctuations; increased market competition; product demand falling short of expectations; risk of high customer concentration; risk of technology iteration; risk of new business development falling short of expectations.