Incidents:
The company released its 2023 annual report on March 16, 2024. In 2023, the company achieved operating income of 7.166 billion yuan, an increase of 7.88% over the previous year, achieved net profit of 1,612 billion yuan, an increase of 34.33% over the previous year, and realized net profit without return to mother of 1,566 billion yuan, an increase of 33.60% over the previous year. In the fourth quarter, the company's revenue and net profit to mother achieved year-on-year growth of 1.83% and 34.08%, respectively, with month-on-month increases of 5.64% and 12.49%, respectively.
Opinions:
Product diversification drives performance growth, and the CNC machine tool business is impressive. Financial data shows that the company's direction of tire molds and large parts and machinery products is in line with the overall development trend of the industry. In 2023, the CNC machine tool business achieved revenue of 308 million yuan, a year-on-year increase of 111.76%, which became the highlight of the company's performance growth. The automotive tire mold business achieved revenue of 3.79 billion yuan, an increase of 15.76% over the previous year, further consolidating the company's leading position in related markets; the operating income of large component machinery was 2.70 billion yuan, down 8.91% year on year, but the gross profit margin was 23.41%, up 6.57% year on year.
Operational efficiency improved, and cash flow performance was outstanding. The net cash flow from the company's operating activities increased by 188.96% year on year, and the cash inflow from investment activities increased by 151.61% year on year. The company achieved remarkable results in improving operating efficiency and capital use efficiency. Cash outflow from investment activities increased 174.79% year on year, and the net increase in cash and cash equivalents surged 117.20% year on year. The company's overall financial situation is good, and it has strong cash liquidity and financial stability.
Increased investment in R&D, and innovation drives development. The company continued to increase R&D investment. In 2023, R&D expenses were 3,557 billion yuan, an increase of 20.52% over the previous year. R&D investment accounted for 4.96% of revenue, up from 4.44% in the same period last year. R&D not only promotes the company's technological innovation and product upgrades, but also contributes to the company's long-term sustainable development. During the reporting period, the company obtained more than 270 invention patents and launched new technology products such as high-efficiency and energy-saving molds, electric heating vulcanizers, and electric heating molds, laying a good foundation for future development.
The global layout is deepening, and market competitiveness is constantly increasing. The company maintains a leading position in the tire mold manufacturing market and has established subsidiary companies in Asia, Europe, North and South America, etc., forming a complete global production service system. As a casting and finishing supplier for large parts and machinery products, the company can provide overall solutions and one-stop services, and has established strategic partnerships with many Fortune 500 customers, and its market competitiveness is constantly increasing.
Profit forecast and investment rating: The company is a leader in the tire mold industry. With the recovery of the global automobile industry and the rapid growth in NEV sales, demand for high-quality tire molds is expected to increase; in the context of the transformation of the global energy structure, investment in renewable energy increases, and the wind power and gas turbine industry has broad prospects; the machine tool industry is expected to continue to recover under pressure in 2024, and is expected to achieve slight growth throughout the year. The company's main product functional components and high-end CNC machine tools are expected to continue to grow. Based on the above judgment, we expect the company's net profit to be 17.16, 19.57, and 2,291 billion yuan in 2024-2026. According to the latest stock price, the corresponding PE is 16.55, 14.51, and 12.39 times, respectively, covered for the first time, giving it a “buy” rating.
Risk warning: 1) Uncertainty in the international trade environment; 2) price fluctuations of raw materials; 3) challenges of technological innovation and product upgrading; 4) increased market competition; 5) risk of exchange rate fluctuations.