2023 results are in line with our expectations
The company announced its 2023 results: revenue of 20.074 billion yuan, +26.75% year on year; net profit to mother of 3.339 billion yuan, +22.86% year over year; deducted non-net profit of 3.245 billion yuan, +23.73% year over year. The company's performance is in line with our expectations. Looking at a single quarter, 4Q23's revenue was 4.715 billion yuan, +39.34% year over month, and +2.48% month on month; net profit to mother was 446 million yuan, +2.92% year over year, and -52.61% month on month.
Development trends
Efforts in various fields drive steady growth, and performance shows the resilience of leading leaders. 1) By product, the company's traditional main business maintained rapid growth. In 2023, electrical connectors and integrated interconnect components achieved revenue of 15.5 billion yuan, +27.17% year over year, optical connectors and other optical devices and optoelectronic equipment revenue of 3.147 billion yuan, +27.26% year over year, and revenue of liquid cooling solutions and other products was 1,427 billion yuan, +21.35% year over year. 2) Through continuous market development, business-side companies hedge against the background of special industry adjustments. The NEV sector has targeted connectivity projects for many mainstream car companies throughout the year, and business in new fields such as data centers has expanded rapidly. Annual connector production and sales volume is +17.89%/21.03%, respectively, driving steady growth in the company's performance.
Product structure optimization helps increase gross profit and stimulates cost expansion due to amortization. 1) The company's expense ratio for the 2024 period was +2.41ppt to 19.49%, of which the management/R&D expenses ratio was +0.90ppt t to 5.74% year-on-year, mainly due to the increase in the company's stock incentive amortization expenses. 2) The company gradually transformed from a single connector product package to an overall interconnection solution provider. Product structure optimization combined with the improvement of intelligent manufacturing capabilities drove the company's gross sales margin of +1.41% to 37.95% YoY in 2023, and the net profit margin was -0.52% to 16.63% YoY due to cost expansion. 3) The company expects to achieve total revenue/profit of 22.1 billion yuan/4.11 billion yuan in 2024, respectively, +10.09%/10.08% year-on-year.
Accelerate industrial layout and lower-level capacity building, and further strengthen the leading position in connectivity solutions. 1) The company made every effort to promote the construction of intelligent manufacturing. In 2023, it invested in nearly 100 automated production lines and was selected as the “2023 Intelligent Manufacturing Demonstration Factory” issued by the Ministry of Industry and Information Technology; 2) The South China Industrial Base and Luoyang Infrastructure Device Industrial Park project were gradually put into operation, and the Shenyang Xinghua and Taixing aviation optoelectronic projects were successfully capped, and the high-end interconnected technology industry community with an investment of 2.72 billion yuan was officially launched; 3) The international layout continues to strengthen. The company currently has three overseas branches in Germany, South Korea and Vietnam, and the supporting role of the global platform is gradually showing. We believe that the company will continue to increase its industrial capacity building and accelerate its layout in emerging fields such as globalization and civil aviation, which is expected to further strengthen the company's leading position and help the company develop with high quality in the long term.
Profit forecasting and valuation
Considering the pace of downstream demand release, we lowered our 2024/2025 profit forecast by 6.7%/12.8% to 36.75/4.184 billion yuan. The company's current stock price corresponds to 20.4/17.9 times the price-earnings ratio for 2024/2025. We are optimistic about the company's long-term development prospects, maintain an outperforming industry rating, and maintain a target price of 41.21 yuan, corresponding to a price-earnings ratio of 23.8/20.9 times 2024/2025, with a potential increase of 16.7%.
risks
Delivery of products and orders falls short of expectations; risk of rising raw material prices.