In 23, it achieved revenue of 2,321 million yuan/yoy +25.76%, net profit to mother of 318 million yuan/yoy +21.13%, Neway CNC published an annual report, achieved revenue of 2,321 million yuan (yoy +25.76%) in 2023, net profit of 318 million yuan (yoy +21.13%), and deducted non-net profit of 276 million yuan (yoy +24.57%). Among them, Q4 achieved revenue of 582 million yuan (yoy +16.79%, qoq -7.82%) and net profit to mother of 81.704 million yuan (yoy +12.58%, qoq -2.44%). Considering that the recovery in domestic demand fell short of expectations, we appropriately lowered the company's 2024-2025 EPS to 1.16 and 1.44 yuan (previous value 1.29 and 1.61 yuan), and added the 2026 EPS forecast to 1.78 yuan. Comparable to the 24-year Wind, the average PE was expected to be 25.28 times. Considering that the recovery in domestic demand falls short of expectations, the competitive landscape of the industry may deteriorate. The company was given 21 times PE in 24 years, with a target price of 24.43 yuan (previous value of 30.75 yuan) to maintain a “buy” rating.
Profitability under high base is under year-on-year pressure
In 2023, the company's gross profit margin was 26.46% /yoy-1.03pct, net profit margin 13.69% /yoy-0.52pct, of which 23Q4 company gross profit margin 26.41% (yoy-0.77pct, qoq-0.77pct), net profit margin 14.04% (yoy-0.53pct, qoq+0.77pct). In terms of the period cost ratio, the 23Q4 company has a period cost ratio of 12.64% /yoy+0.02pct, of which the sales expense ratio is 7.10% /+0.67pct, management expenses ratio 1.90% /yoy-0.38pct, R&D expenses ratio 3.45% /yoy-0.13pct, financial expenses ratio 0.19% /yoy-0.13pct. The company has good cost control during the period, and continues to invest in R&D, making full efforts to lead the domestic replacement of high-end machine tools.
Balanced development smooths out specific downstream fluctuations, and actively explores overseas markets as one of the leaders in the balanced development of the domestic machine tool industry. Neway has always adhered to a comprehensive product development strategy and balanced development of various products of CNC horizontal lathes, CNC vertical lathes, vertical machining centers, CNC milling and boring machines, and gantry machining centers to diversify the risk of fluctuations in specific downstream industries. According to China Customs data, China's metal cutting machine tool export value was 5.53 billion US dollars in 2023, an increase of 27.6% over the previous year, achieving a trade surplus in the first year. In recent years, the company has actively developed overseas markets. Through the establishment of a dedicated overseas sales network, the company has sold products to more than 50 countries or regions. In 23, the company's overseas revenue revenue was 705 million yuan (yoy +113.0%), and the share of overseas revenue increased from 17.9% in '22 to 30.4% in '23.
The trend of industrial mother machine industry concentration is gradually showing. Machine tool leaders are fully benefiting. According to data from the National Bureau of Statistics, China's metal cutting machine tool production increased 6.4% year on year in 2023. As a leading machine tool enterprise in China, Neway CNC's revenue increased 25.76% year on year in 23, which is significantly better than the industry.
At the beginning of the development of China's machine tool industry, the country was dominated by the “Eighteen Arhats”. Starting from specific needs and painstaking research, private enterprises gradually took over the banner of domestic replacement of high-end machine tools. We believe that the trend of concentration of leaders in the machine tool industry will accelerate. Neway CNC, as a domestic leader, may fully benefit from the trend of industry concentration, and its revenue growth rate is expected to continue to be higher than the overall growth rate of the industry in the future.
Risk warning: The competitive landscape of the industry worsened beyond expectations; overseas business expansion fell short of expectations.