The company's recent situation
The company held an annual performance report meeting on March 19: Looking back at 2023, against the backdrop of weaker-than-expected domestic downstream demand recovery and global industrial chain restructuring, the company achieved annual revenue of 13.07 billion yuan, bucking the trend and increasing 6.2% year on year, of which overseas sales increased 17.3% year on year. Since the beginning of 2024, the company's orders have continued to recover and rise in the second half of last year. We believe that the company has both a recovery in the short to medium term and the promotion of long-term strategies and policies.
reviews
A high increase in orders is expected in 24Q1, and the growth rate of domestic and foreign sales is good. The company's public results conference stated that 24Q1 orders continued to recover and pick up in the second half of '23. January and February orders increased in double digits year over year, and it was observed that the order situation in March may be the best monthly level in the past 15-20 months. As of March 18, the company's order data for March had exceeded the monthly average for the whole of last year. Structurally, the company's performance will indicate that up to now, the 24Q1 orders are growing rapidly at home and abroad.
Domestic: The economy has bottomed out since the middle of last year, and the trade-in policy has been beneficial for a long time. After a downward period of nearly 2 years, the company's injection molding machine orders have continued to recover since August last year (5th generation machine was launched in August last year). 2H23 revenue was +15.4% YoY and +4.8% month-on-month. The company observed that the 1H24 boom may continue. We judge that demand is mainly strong in downstream daily necessities and other industries. Looking at the medium to long term, the “Action Plan to Promote Large-scale Equipment Renewal and Consumer Goods Trade-In” was released on March 13 this year. According to the CICC Macro Group, the plan uses automobiles, home appliances, and home furnishings as a starting point to implement consumer goods trade-in actions. According to the company's public results conference, automobiles and home appliances together account for 30-40% of the company's downstream in the past two years, and are an important downstream pillar industry. We believe that with the gradual advancement of relevant policies, it is expected to drive the automobile and home appliance industry to increase capital expenditure, and demand for injection molding machines is expected to increase further.
Overseas: Accelerate the construction of global production capacity and continue to advance the “55 Strategy”. In recent years, the company's share of export sales has continued to rise, from nearly 30% in 2020 to nearly 40% in 23. The company's future goal is to achieve the “55 Strategy”, which means that domestic and foreign sales each account for 50% of domestic and foreign sales revenue. Currently, the company is actively planning to build overseas production capacity and service experience centers. The first phase of the Mexican factory was opened in mid-23, the second plant in India is scheduled to be completed and put into operation in 24, and the Serbian plant and the Japanese factory are scheduled to be completed and put into operation in 25. We believe that the company has a remarkable first-mover advantage and clear strategic planning, and is expected to continue to improve its performance.
Profit forecasting and valuation
Maintain the 2024/2025 net profit of 28.71/3.305 billion yuan unchanged. The current stock price corresponds to the 2024/2025 price-earnings ratio of 10.6 times/8.8 times. Maintaining an industry rating and a target price of HK$23.54, corresponding to 11.7 times the 2024 price-earnings ratio and 9.7 times the 2025 price-earnings ratio, with 10.0% upside compared to the current stock price.
risks
Market demand for injection molding machines fell short of expectations, prices of raw materials and shipping increased, and the US dollar appreciated.