Net profit to the mother increased by 22.86% year-on-year in '23, maintaining the “buy” rating and released an annual report. In 2023, it achieved revenue of 20.74 billion yuan (yoy +26.75%), net profit to mother of 3.339 billion yuan (yoy +22.86%), deducting non-net profit of 3.245 billion yuan (yoy +23.73%). Among them, Q4 achieved revenue of 4.715 billion yuan (yoy +39.34%, qoq +2.48%) and net profit of 446 million yuan (yoy +2.92%, qoq -52.61%). We expect the company's 2024-2026 EPS to be 1.93, 2.32, and 2.72 yuan respectively (previously 1.58, 1.99, 2.44 yuan in 2023-2025). Comparatively, the company Wind agreed to expect an average PE value of 21 times. Considering that the company is an industry leader and has a high level of technology, the company is making good progress in the field of new energy vehicles, and the market space is expected to expand. The company was given 24 times PE in 24 years, with a target price of 46.27 yuan (previous value of 55.72 yuan), maintaining a “buy” rating.
Various businesses have continued to grow, and gross margin levels have been rising steadily
The company's revenue from electrical connectors and integrated interconnect components increased 27.17% year on year; revenue from optical device-related business increased 27.26% year on year; revenue from liquid cooling solutions and other products increased 21.35% year on year, and all businesses maintained good growth. In 23 years, the company's preferred position as a supplier for defense business interconnection solutions continued to be consolidated, and overall competitiveness was steadily improved; high-end civilian manufacturing business achieved rapid growth in data centers, petroleum equipment, photovoltaic energy storage, etc.; the coverage rate of mainstream car companies in the NEV business continued to increase, and multiple projects were targeted throughout the year. The company's overall gross profit margin in '23 was 37.90%, up 1.41pct from '22, and the gross margin of various businesses increased steadily. Among them, the gross profit margin of electrical connectors was 40.92%, an increase of 0.86 pct; the gross profit margin of optical connectors was 26.44%, an increase of 3.71 pct; and the gross profit margin of liquid cooling and other businesses was 31.12%, an increase of 1.91 pct.
The overall cost rate increased slightly, and R&D investment remained high
The company's expense ratio in '23 was 19.49%, up 2.41 pct from '22. Among them, the sales expense ratio was 2.66%, up 0.01pct from '22, and was basically stable; the management expense ratio was 6.64%, up 0.90pct from '22, mainly due to an increase in equity incentive amortization; the R&D expense ratio was 10.95%, up 0.87pct from '22, and the R&D expenses increased 37.55% over '22. In recent years, the company has continued to strengthen innovation drive, strengthen technological empowerment, and make new breakthroughs in scientific and technological innovation achievements. R&D expenses have stabilized at more than 10%.
Production capacity has been built smoothly, investment in subsidiaries has been increased to enhance core competitiveness. In 2023, the company accelerated the capacity building of the modern industry, the basic device industrial park (phase 1) project was successfully completed, the South China Industrial Base (Phase I) began a new journey of high-end manufacturing, and the high-end interconnected technology industry community, civil aircraft and industrial interconnection industrial park was fully started. Capacity construction is expected to break the company's production capacity bottlenecks and create scale effects; in '24, the company plans to invest 2.37 billion yuan in 5 subsidiaries, including Shenyang Xinghua and China Aviation Fujida, to further enhance the capabilities of the subsidiaries and thus enhance the company's overall core competitiveness.
Risk warning: Military business demand falls short of expectations; expansion of civilian products such as new energy vehicles falls short of expectations.