Investment events
Xinbao Co., Ltd. disclosed its 2023 performance report. The company expects to achieve operating income of 14.65 billion yuan (+6.9% YoY), net profit to mother of 980 million yuan (+1.6% YoY), and net profit of 1.0 billion yuan (YoY, +0.5%) after deducting net income to mother. Q4 is expected to achieve operating income of 3.89 billion yuan (+30.7% YoY), net profit of 240 million yuan (YoY +104.9%), and net profit of 190 million yuan after deducting net income to mother (+180.5% YoY).
Key points of investment
Domestic sales are steady, and export sales have increased dramatically
In '23, the company's export sales were +11.08% year over year to 10.812 billion yuan, and domestic sales were -3.22% year over year to 38.36 billion yuan. In Q4 alone, the company's export sales increased sharply by 51.62%. The main benefits are expected to be the low base (-43% YoY in 22Q4) and the impact of overseas demand recovery; domestic sales +0.55% YoY, or the main benefit of new product launches.
Profitability Q4 improved significantly, and is expected to benefit mainly from increased gross margin of export sales and cost ratio optimization. The net interest rate for the year 23 was 6.67% (-0.35% YoY), and the net profit margin for Q4 was 6.19% (+2.24% YoY).
At the end of 23, the US dollar exchange rate was +1.6% year-on-year. We expect the gross margin of export sales to increase; 22Q4 export sales declined sharply, and the rigidity of expenses had an impact on profit margins (22Q4 sales+R&D+ management rates reached 17.6%, normal quarter was around 11%). We expect 23Q4 to benefit from an increase in the scale of export sales, and the cost ratio improved markedly.
In '23, the company's exchange earnings decreased by about $154 million year on year, and forward foreign exchange contracts/options contract investment losses and fair value change losses increased by about 5 million yuan year on year. Single Q4 Company's exchange losses were reduced by 39.26 million yuan, and hedging-related losses were reduced by 3.56 million yuan.
Profit forecasting and valuation
The company's export sales continue to recover, and domestic sales remain steady. We expect the company's net profit to be 977 million yuan/1,087 million yuan/1,197 billion yuan respectively in 2023-2025, +1.60%, +11.27%, and +10.10%, respectively. Corresponding to the current PE stock price, the PE is 14X/12X/11X, respectively, maintaining the “gain” rating.
Risk warning
Overseas demand declined; domestic sales recovery fell short of expectations, etc.