Incident: The company released its 2023 performance report. According to preliminary accounting, net profit for the whole year was 149 million yuan, an increase of 21.79% over the previous year, and net profit after deducting non-return to mother was 146 million yuan, an increase of 17.24% over the previous year. Net profit for the fourth quarter of the year alone was 43 million yuan, up 43.02% year on year, and net profit after deducting non-return to mother was 42 million yuan, up 31.9% year on year. The company's performance for the fourth quarter of 2023 slightly exceeded market expectations.
Customer/product structure optimization+new product launch raised the gross margin level. The company's profitability increased significantly, and the company's gross margin is expected to increase by about 6% year-on-year in 2023, which is driving the net interest rate to increase from 16.35% in 2022 to about 20%.
19% of the main factors. In recent years, the company has optimized its customer and product structure, and introduced new products one after another, which has led to an increase in profit levels. (1) The share of overseas revenue continues to increase, and the stability of downstream customers is strengthened. In 2020-2022, the company's overseas revenue share was 59.7%/64.9%/70.1%, respectively, and the mature European and American automotive aftermarket was the main battleground (which accounted for more than 80% of overseas revenue); (2) the revenue share of wheel bearing units/clutches, tensioners and idler bearings continued to increase, and the gross margin level of these two major products was relatively high (26.8%/31.8% in 2022, overall gross margin of 26.2%), and the development of new models is expected to further raise the gross margin level in Q3 2023 The gross margin level has increased significantly to 32.5%; (3) The company is actively promoting the expansion of new businesses and is making reserves for NEV drive system bearings, agricultural machinery bearings and heavy truck bearings.
The revenue growth rate was corrected in the second half of 2023. The company's active investment will resolve production capacity restrictions to further expand the scale of revenue. The company's revenue in the first half of 2023 fell 13.48% year on year. As the market picked up, the revenue in the second half of the year increased 11.26% over the same period in 2022, and the decline in annual revenue narrowed to 1.36%. Fluctuations in the company's revenue are mainly affected by demand in the global automotive aftermarket. At the same time, production capacity has been clearly limited due to the relative saturation of the company's production in recent years. Beginning in the fourth quarter of 2022, the company made successive investments. Among them, it invested in the Thai factory in the fourth quarter of 2023 to build a factory for the entire industry chain. It is expected that the new equipment will be put into operation in the first quarter of 2024. In the future, with the gradual advancement of production capacity construction such as IPO fund-raising projects, the company's revenue scale is expected to expand further.
Profit forecast: Based on the 2023 performance report disclosed by the company, we adjusted the company's profit forecast. The company's net profit forecast for 2023-2025 is 1.49/1.82/234 million yuan (previous values were 1.46/1.81/233 million yuan, respectively), up 21.7%/22.3%/28.4% year-on-year respectively (previous values were 19.2%/24.3%/28.5%, respectively). According to the latest closing price, the corresponding PE is 22/18/14 times, respectively. The current valuation level of the company has been clearly adjusted to close to the historical average of comparable companies (the average PE value for the past year was 22/22/13 for Radic/ Zhaofeng Shares/ Guansheng shares, respectively). Considering the steadiness of the company's main business operations and the potential for new business expansion in the future, we believe that the current company has a certain allocation cost ratio, so it has been adjusted to a “buy” rating (the previous value was a “buy” rating).
Risk warning events: risk of changes in the macropolitical and economic environment; risk of market competition; risk of profit forecasting assumptions falling short of expectations; risk that public data used in research reports may be delayed or not updated in a timely manner.