Incidents:
The company released the 2023 performance report. In 2023, it achieved operating income of 2,326 billion yuan, an increase of 26.05% over the previous year, and realized net profit of 320 million yuan, an increase of 21.89% over the previous year, which is basically in line with expectations. In the 2023Q4 single quarter, the company achieved operating income of 587 million yuan, an increase of 17.86% year on year; net profit to mother was 83.71 million yuan, an increase of 15.31% year on year.
Company reviews:
Demand in the machine tool industry was under pressure in 2023, focusing on the decline in corporate profitability. In 2023, the machine tool industry faced problems such as insufficient downstream demand and increased industry competition. Statistics from the China Machine Tool Industry Association show that from January to November 2023, the revenue of key linked companies increased 4.8% year on year, total profit decreased 7.3% year on year, and profitability declined.
The company practices internal skills to ensure basic stability in profitability, demonstrating operational resilience. Facing the severe market environment, while improving product performance, the company implements fine management, strictly controls material procurement, product design and various expenses, and continuously improves product competitiveness. At the same time, it actively explores overseas markets, increasing the share of overseas revenue, and achieving an increase of more than 20% in total revenue and net profit due to the whole year, which is clearly superior to the industry level. In 2023, the company's net profit margin was 13.74%, down 0.47pct year on year; 2023Q4's net interest rate in a single quarter was 14.25%, down 0.32pct year on year. The net interest rate remained stable, showing operational resilience.
Actively explore overseas markets to drive revenue and performance growth. The company has established a dedicated overseas sales network. According to company announcements, products have been sold to more than 40 countries and regions, including the United States, Germany, the United Kingdom, Italy, Russia, and Brazil. Due to intense price competition in the domestic market this year, the gross margin of overseas business is higher than that of the domestic market, overseas orders remain at a high level, and the share of overseas revenue has further increased, driving the company's overall gross margin increase and product structure changes.
R&D innovation strengthens product competitiveness and guarantees new order acceptance. According to the company's announcement, through independent research and development, the company has developed high-torque electric spindles, high-precision CNC turntables, etc., which make some core functional components autonomous and controllable, improve compatibility with the whole machine, effectively reduce product costs, and enhance product competitiveness. Domestic downstream demand was still weak in 2023. In the context of oversupply, manufacturers in the industry competed for orders, and price competition was becoming more intense, and the overall scale of the company's new orders was stable.
The profit forecast was lowered and the “buy” rating was maintained. Considering that domestic demand will take time to recover, and with reference to the company's express data, we lowered our profit forecast. The net profit for 2023-2025 is estimated to be 3.20/3.93/482 million yuan (previous value: 3.47/4.48/547 million yuan), and the company's current stock price (2024/2/22) corresponds to 2023/24/25 PE 17, and 11X, respectively. Comparable to the company Haitian Precision PE is 21, 17, and 14X, respectively (data from Wind's consistent forecast).
As a leading domestic CNC machine tool manufacturer, the company is optimistic about the company's order and shipment growth against the backdrop of a recovery in domestic demand+continued overseas expansion, and maintains a purchase rating.
Risk warning: the risk of demand fluctuations in the downstream industry, the risk of dependence on imports of core components, and the risk of increased industry competition.