Core views

The company released its 2023 annual report. Net profit to mother increased by 34.33% year on year, far higher than the 7.88% revenue growth rate, mainly due to: ① product structure optimization, the share of automobile tire equipment with the highest gross margin (mainly tire molds) increased by 4.92 pct; ② lower raw material prices; ③ positive exchange rate impact; ④ per capita revenue generation increased 9.50% year on year to 571,900 yuan.

Haomai Technology can provide overall solutions from rough to finished products, and has the advantage of integration. Looking ahead to 2024, overseas factories and overseas orders for the tire mold business will continue to advance. The increase in the share of gas turbines in the large parts business will improve gross margin, and the machine tool business is expected to become a new growth pole.

occurrences

The company released its 2023 annual report. In 2023, it achieved revenue of 7.166 billion yuan, a year-on-year increase of 7.88%, and net profit to mother of 1,612 billion yuan, an increase of 34.33% over the previous year.

Looking at Q4 alone, the company achieved revenue of 1,864 billion yuan, an increase of 1.83% year on year; net profit to mother was 443 million yuan, an increase of 34.08% year on year.

Brief review

Business revenue in various sectors increased steadily, and the machine tool business gradually became a new growth pole for overseas projects, domestic cost reduction and efficiency, and the gross margin of the tire mold business increased by 5.02 pct. The company's tire mold business covers motorcycle tire molds, aircraft tire molds, passenger tire molds, truck tire molds, engineering tire molds, giant tire molds, capsule molds, air spring molds, etc. In 2023, the tire mold business achieved operating income of 3.79 billion yuan, a year-on-year increase of 15.76%, a gross profit margin of 43.06%, an increase of 5.02pct over the previous year. The main reason was a significant increase in personnel efficiency. The per capita revenue generation increased 9.50% year-on-year to 571,900 yuan. The company continues to independently develop and upgrade automated equipment for mold manufacturing. At the same time, it continues to promote the international production capacity layout. The tire mold project was expanded in Thailand and put into use in October. In addition, the company began construction of its Mexican factory and set up a service organization in Cambodia, which has enriched the company's global production and service system, which is conducive to more convenient close service to customers.

Changes in business structures have led to changes in the revenue and gross margin of large parts and machinery products in different directions. The downstream of the company's large parts and machinery products includes wind power, gas engines, die-casting machines, injection molding machines, construction machinery, etc., to provide customers with one-stop services from rough to processing. In 2023, the company's large parts and machinery products achieved operating revenue of 2,770 billion yuan, a year-on-year decrease of 8.91%, gross profit margin of 23.41%, and a year-on-year increase of 6.57 pcts. We believe that the main reason is that the gas turbine industry, which has higher technical content and higher profit margins, is booming, and its share continues to increase. Despite the decline in wind power business leading to a decline in overall revenue, gross margin has increased significantly. In the context of dual carbon, combined with industry policy drivers and technological progress, demand in the gas turbine market continues to improve, and the company's orders for this business are full; the long-term development trend of the wind power industry can be expected, but due to excessive casting capacity and continued decline in tender prices, the company's wind power parts business has a negative effect on the overall revenue of large component machinery products.

Continued strengthening of R&D, the machine tool business showed high growth. The company's machine tool products are committed to the development and promotion of multi-axis composite processing machine tools, machine tool functional components, etc.

In 2023, the company's CNC machine tool business achieved revenue of 308 million yuan, an increase of 111.76% over the previous year. In 2022, since establishing external sales of machine tool products, the company has continued to develop and launch a variety of products. Serialized products such as 5-axis laser machining centers for superhard tools and composite machining centers for turning and milling will be on the market in 2023. The company's products have been applied in batches in aluminum alloys, automotive parts, 3C, precision molds and other industries, and have received good feedback. To provide customers with close technical support and services, in addition to setting up application centers in Dongguan and Kunshan, the company established Xi'an Haomai CNC Machine Tool Co., Ltd. in 2023, which is expected to continue to grow.

Significant increase in profitability, significant technological process and brand advantages

Costs have been reduced and product structure has been optimized, and profitability has improved significantly. In 2023, the company's net profit was 1,612 billion yuan, up 34.33% year on year, far higher than the 7.88% revenue growth rate. We think it was mainly due to the following reasons: ① Product structure optimization: the share of the automobile tire equipment (mainly tire molds) business with the highest gross margin increased by 4.92 pct to 55.16%, and its gross margin increased to 42.48%, driving an increase in overall gross margin; ② Reduced raw material prices: the price of raw materials has declined, especially the large parts sector, which has benefited a lot; ③ The positive impact of the exchange rate: Overseas business accounts for the company's revenue 46.25%, and mostly settled in US dollars, brought considerable exchange gains and losses; ④ Personnel efficiency improved significantly: the number of employees decreased, but per capita income increased 9.50% year over year, reaching 571,900 yuan.

As a national high-tech enterprise, the company continues to step up R&D innovation. The company has obtained more than 270 invention patents; has successively launched new technologies and products such as high-efficiency and energy-saving molds, electric heating vulcanizers, and electric heating molds; and continues to independently develop and upgrade special equipment for mold manufacturing automation. In the tire mold business, the company is proficient in the three mold processing technologies of EDM, engraving, and precision casting aluminum. At the same time, it keeps up with technological development trends. It uses various new processes such as laser engraving and 3D printing in the mold manufacturing process, and has unparalleled advantages in the same industry in terms of comprehensiveness, advanced nature and stability of the technical process. In the large-scale parts and machinery products business, the company relies on strong R&D, casting strength and machining capabilities to form a comprehensive advantage of integrated casting and processing, which is conducive to better meeting customer needs and providing convenient services for customers.

Profit forecasting and investment advice

Haomai Technology has its own R&D and design center, foundry plant, and machining factory. It can provide overall solutions and one-stop services from rough to finished products, and has built a strong competitive barrier. Looking ahead to 2024, overseas factories and overseas orders for the company's tire mold business will continue to advance. The increase in the share of gas turbines in the large parts business will improve gross margin, and the machine tool business is expected to become a new growth pole.

Assumptions by business:

(1) Automobile tire equipment sector: Considering that the company already has a high market share in the global market share, the company has certain growth potential through innovative categories and overseas factory construction. Assuming that the revenue growth rate in 2024-2026 is 13%/12%/12%, respectively; at the same time, considering that cost reduction and efficiency increases, per capita efficiency increases, but gross margin returns slightly as production capacity climbs. Assuming that the gross margin for 2024-2026 is 41%/41.5%/42%, respectively; (2) Large gas turbine parts processing sector: gas turbine prosperity continues to improve, wind power components will continue to improve gradually Stable, assuming that 2024-2026 revenue growth rates are 10%/10%/10%, respectively; gas turbine barriers are higher and gross margin is higher. As their share increases and raw material costs improve, the gross margin for 2024-2026 is 25%/25.5%/26%, respectively;

(3) CNC machine tool business: Autonomous control of industrial mother machines is a major development direction. The company has accumulated over a long period of time, leading product technology, and is expected to become a new growth pole. Assuming that 2024-2026 revenue growth rates are 55%/40%/40%, respectively; with scale effects and product upgrades, the gross margin for 2024-2026 is 30%/31%/32%, respectively.

The company is expected to achieve net profit of 18.31, 20.85, and 2,435 billion yuan from 2024 to 2026, with year-on-year growth rates of 13.61%, 13.86%, and 16.77%, respectively. Corresponding PE is 15, 13, and 12 times, respectively. The first coverage was given. Considering the high market position of the company's tire mold business and the growth of the machine tool business, it was given a “buy” rating.

Risk warning

(1) Risk of exchange rate fluctuations: Over the years, the company has been committed to developing overseas markets and developing high-end foreign customers, and the company's export sales revenue accounts for a relatively high proportion.

China's RMB has a managed floating exchange rate system. Fluctuations in the exchange rate will directly affect the sales pricing of the company's export products, thereby affecting the company's profit level and posing certain risks to the company's operations. Furthermore, as the scale of the export business continues to grow, the company's foreign currency assets will also increase, and fluctuations in the exchange rate of RMB against foreign currencies will bring exchange gains and losses to the company.

(2) Market competition risk: As an advantageous enterprise in the field of high-end tire mold manufacturing, the company has a strong competitive advantage in the industry in terms of technical level, market share, production and sales scale. The annual production and sales volume of leading products are among the highest in the industry, maintaining a high market share and showing strong competitiveness. However, along with market competition in the mold industry, if the company fails to further enhance its strength in terms of production capacity scale, technology research and development, product quality, and efficiency costs in a timely manner, it may adversely affect the company's performance.

(3) Risk of fluctuations in raw material prices: The company's main raw materials are forged steel, pig iron, aluminum ingots, etc. Domestic prices of steel and non-ferrous metals have fluctuated by varying degrees in recent years. If the price of raw materials rises, it may reduce the company's gross margin and net interest rate levels, which will adversely affect profitability. Judging from the actual situation, the company strives to strengthen production control through equipment upgrades, process improvements, management improvements, etc., and increase or reduce reserves in due course by tracking fluctuations in the raw material market to meet the company's production and operation needs, and reduce the adverse effects of rising raw material prices on costs to the greatest extent. Assuming that the company's gross margin decreased by 2 pct in 2024-2026 due to the impact of raw materials, the company achieved net profit of 16.88, 19.23, and 2,251 billion yuan respectively during the same period, +4.70%, +13.92%, and +17.04%, respectively.