Incident: The company released its 2023 annual report. In 2023, the company achieved total operating revenue of 1.74 billion yuan, +37.8% year-on-year, realized net profit of 260 million yuan, +43.9% year-on-year, and realized net profit of 290 million yuan without return to mother, +130.4% year-on-year.
Order volume boosts revenue growth, and customer and product structure optimization drives a significant increase in gross margin. In 2023, the company achieved total revenue of 1.74 billion yuan, +37.8% year-on-year, realized net profit of 260 million yuan, +43.9% year-on-year, and realized net profit of 290 million yuan without return to mother, +130.4% year-on-year. The increase in the company's total revenue is mainly due to an increase in order demand and product delivery from some customers. From a gross margin perspective, the company's gross margin increased significantly year-on-year in '23. The company's gross margin in '23 was 27.8%, up 7.7pct compared to '22. The increase in the company's performance is mainly due to the company's active adjustment of customer and product structures, strengthening internal management, and reducing costs and increasing efficiency. Looking at the cost rate for the period, the company's sales expenses rate for 23 was 1.0% (+0.4pct), the management expense ratio was 4.4% (+0.2pct), the R&D expenses rate was 2.6% (-1.1pct), and the financial expenses ratio was -1.2% (+0.3pct). The company's overall cost ratio increased by 0.98 pct compared to the same period last year. Overall, the company made substantial progress in reducing costs and increasing efficiency, and the cost ratio remained stable at a low level during the period. As of the end of 2023, the company's balance ratio was 18.02% and the cash ratio was 2.12.
The company's low balance ratio and high cash ratio indicate that the company has sufficient capital, stable financial indicators, strong operational resilience and resilience to risks, providing a strong financial guarantee for the company's strategic layout and investment needs for subsequent sustainable development.
In line with the development trend of electrification, the market share in the hybrid field of new energy has increased significantly. In addition to maintaining the core 3C components to bring continuous growth to the company's business, the company is actively expanding its new energy business. Judging from the NEV market share, the company's share of cylinder heads, cylinder blocks, crankshafts, transmission boxes and other new energy hybrid vehicles in '23 was 15.52%, 11.34%, 3.93%, and 1.04% respectively, up 11.11pct, 10.74pct, 3.93pct, and 1.04pct, respectively. The market share of related products increased significantly compared with NEV in '22, and the company's product structure is continuously being optimized.
The “reengineering and upgrading” strategy is progressing steadily, and the development of new energy hybrid drive systems is being carried out in an orderly manner. In order to meet market demand, in 2018, the company launched a “re-engineering and upgrading” strategy and set up a subsidiary Meifeng Qin An to enter the new energy sector to engage in R&D and production of hybrid drive system products. The company is steadily advancing the research and development of hybrid drive system products according to the plan. It has completed the development and manufacture of special engine, motor and reducer samples, completed the assembly of motor controller prototypes, and also completed some performance and durability tests of engines and reducers. The joint software and hardware adjustment of motors and motor controllers is in full swing. At the same time, on the basis of the existing hybrid drive system dual-motor reducer development platform, single-motor reducer and electric drive assembly products that can be applied to pure electric models have been developed to expand product usage scenarios. In addition, the company has achieved phased results in the construction of a new energy vehicle drive system base for R&D and production of hybrid drive system assemblies.
Actively expand market space and open up new project growth points. In 2023, the company continued to actively expand its market space and obtained a number of projects including export orders for some transmission cases and cylinder heads from Changan Ford (exported to Ford in North America through Changan Ford). At the same time, we have received quotation invitations from some pure electric and hybrid customers in the new energy sector. The company's overseas business is also continuing to advance. The company has branches in North America, which facilitates direct communication between the company and mainstream car companies in North America. In the future, the company will continue to maintain good communication with potential customers and continue to actively expand new market opportunities with advantages such as technology and process capabilities.
Maintain an “overweight” investment rating. The company is gradually transforming into the new energy market, and its products can meet the needs of different models such as fuel, hybrid, and pure electric vehicles to varying degrees. As the company continues to develop new energy hybrid drive systems, continuously stabilize and expand customers, and continuously optimize the product structure, new energy vehicles will become the company's second growth pole. The company's net profit for 24-26 is estimated to be 3.5/43/52 billion yuan, respectively, maintaining the “increase in holdings” investment rating.
Risk warning: risk of industry policy instability; risk of new energy business development falling short of expectations; risk of excessive customer concentration; risk of falling product prices; risk of fluctuating raw material prices, etc.