Incident: The company released its 2023 annual report. In 2023, the company achieved revenue of 2.115 billion yuan, a year-on-year increase of 27.13%, net profit to mother of 0.27 million yuan, an increase of 45.7% year-on-year, net profit after deducting -79 million yuan, a year-on-year reduction of 11.14%.
Revenue has maintained steady growth, expense rates have declined, and net sales interest rates have rebounded. Looking at the fourth quarter of a year, the company achieved revenue of 820 million yuan, a year-on-year increase of 18.43%, net profit to mother of 61 million yuan, a year-on-year decrease of 16.25%, and net profit after deduction of 0.3 million yuan, a slight decrease of 2.3% year-on-year. In terms of profitability, the company's gross margin level reached 32.92% in 2023, a slight decrease of 1.14pct year-on-year. The net sales margin was 1.1%, up 0.75pct from the previous year. The main reason was that the sales expense ratio and management expense ratio all declined, and the cost reduction effect was evident.
NC system revenue maintained rapid growth, and gross margin continued to rise. According to the company's annual report and statistics on key enterprises linked to the China Machine Tool Industry Association, the metal cutting machine tool industry achieved operating revenue of 158.6 billion yuan in 2023, a year-on-year decrease of 7.2%. New orders and in-hand orders for metalworking machine tools decreased by 8.0% and 14.3%, respectively. Also, according to data from the National Bureau of Statistics, metal cutting machine tool production in 2023 was 613,000 units, an increase of 6.4% over the previous year. Against the backdrop of slowing industry demand, the company achieved CNC system business revenue of 890 million yuan in 2023, an increase of 26.2% over the previous year. The business's gross profit margin was 38.7%, an increase of 2.8 pct over the previous year. Mainly, high-end CNC systems were relatively limited by demand, and domestic replacement demand was urgent, and their share in the business increased.
In the future, with the continuous recovery of the global manufacturing industry and the development of emerging industries, the market size of CNC systems is expected to expand further. In particular, rapid development in the fields of intelligent manufacturing and industrial automation will drive the rapid growth of the CNC system market. For example, in the field of 3C processing, with the large-scale promotion of next-generation information technology and Internet technology such as 5G, and driven by consumption upgrades and technological innovation, consumer requirements for 3C products are getting higher and higher, and the market space continues to expand. Furthermore, demand for precision manufacturing of “three-electric” systems for new energy vehicles and their components, such as subframes, shock absorbers, wheels, etc., continues to increase, creating huge market demand for multi-axis linkage and multi-channel high-speed CNC machine tools, opening up broad growth space and development opportunities for the domestic CNC system industry.
Downstream industrial robots continue to break through, and there is plenty of room for alternatives in the automotive and electronics industries. In 2023, the company achieved robot business revenue of 1.12 billion yuan, a year-on-year increase of 35.5%, a gross profit margin of 26.9%, and a year-on-year decrease of 2.1 pct. The main reason was that industry competition intensified, and gross profit of robot bodies and automated production lines declined a lot, but the company's core product, heavy-duty robots, and the development of European and American markets reduced the impact of increased competition on gross profit. Huashu Robotics is one of the few domestic enterprises with complete independent innovation capabilities and independent intellectual property rights in key components of robots (control systems, servo drives, motors, machine bodies, process software, etc.), and is the backbone of domestic robots. With the rapid development of the NEV industry, power batteries, as a core component, have entered a stage of rapid growth. The company's subsidiary Huashu Jinming has increased R&D investment in the lithium battery module/PACK process, tailor-made plans according to customer process requirements, and provided fully automated production lines to meet customer production process requirements. Furthermore, in recent years, with the development of strategic emerging industries such as new energy vehicles, lithium batteries, and photovoltaics in China, the demand and scenarios for heavy-duty robots will continue to expand. Due to their high flexibility, safety, and ease of use, collaborative robots will become an important vehicle for robots to expand other application scenarios. As the number of entrants to oversized collaborative robots increases, application scenarios continue to expand. Based on cost advantages, the collaborative robot market size will continue to grow in 2023, gradually replacing some multi-joint robot applications.
Investment advice: We expect the company to achieve net profit of 1.13, 1.46, and 203 million yuan in 2023-2025, respectively, and the corresponding PE is 53.6/41.63/29.97 times, respectively. The CNC system is the “brain” of machine tools. It is a key part of the localization of high-end CNC machine tools. The company is a leading CNC machine tool company and core target, and is expected to fully benefit from the localization process and large-scale equipment renewal policies in the future. Covered for the first time, giving it a “Recommended” rating.
Risk warning: downstream demand falls short of expectations, domestic substitution process falls short of expectations, technological advancement falls short of expectations, risk of fluctuations in raw material prices, and industry competition exacerbates risks