2023 results are in line with market expectations
The company announced 2023 results: 2023 revenue of 5.788 billion yuan, +20% year-on-year; net profit to mother of 161 million yuan, +87% year-on-year, in the performance forecast range (150-170 million yuan). 4Q23 revenue was 1,639 million yuan, +15%/3% month-on-month; net profit to mother was 121 million yuan, reversing year-on-year losses, -74% month-on-month, in line with market expectations.
Development trends
The company's revenue scale reached a record high, and the expense ratio dropped significantly. The company's 4Q23 revenue scale reached a new high in a single quarter. The gross margin in 2023 was 24.4%, +0.5pct year on year. The net cash flow from the company's operating activities in 2023 was +65.8% year-on-year to 846 million yuan, far exceeding the company's net profit to mother, reflecting the company's strong bargaining and repayment capabilities in the industrial chain. The company's sales expense ratio in 2023 was 3.57%, and the year-on-year performance was stable. The management and R&D expenses ratio was 6.07%/5.84%, a year-on-year decrease of 0.6/0.5pct, mainly due to the steady improvement in the company's operation and management level, while maintaining the intensity of R&D investment to build technological competitiveness. We believe that the company is expected to achieve rapid revenue- and profit-side growth.
The new energy business injects growth momentum, and overseas production capacity implementation supports order volume. In 2023, the company's smart cockpit/new energy/weighing equipment business achieved revenue of 4.128/944/672 million yuan respectively. Among them, the new energy business increased 70% year over year, mainly due to new power customers and the number of charging piles released by the public. The smart cockpit business was +18% year-on-year in 2023, mainly due to the smooth expansion of customers in the smart cockpit business. Electric intelligent upgrades led to a sharp rise in product volume and price. The company's overseas business orders are full, and new production capacity in Europe and Mexico is gradually being released. The company's charging pile products have completed European standard and American standard certification. We believe that the acquisition of new energy projects and the continued release of overseas production capacity are expected to jointly drive steady growth in performance.
Joywin has fulfilled its performance promise, and starting in 2024, the lightweight lineup is expected to unleash profitability. In 2023, changes in the fair value of share acquisition consideration payable and performance compensation receivable due were $0.13 billion and 61 million, respectively, due to the acquisition of Joyson Qunying, resulting in a total non-current loss of $74 million. At the end of 2020, the company acquired Junsheng Qunying's performance promises: net profit for 2021/22/23 was not less than 1.9/3.2/3.9 billion yuan; in 2023/2021-23, the average profit was deducted by 398 million yuan/937 million yuan, exceeding the performance promise. The fair value of performance compensation receivable at the end of the period was 0, and the company expects to stop affecting profits from 2024. We believe that the company will be lightweight starting in 2024 and is expected to achieve significant growth in profitability.
Profit forecasting and valuation
We kept our 2024 profit forecast almost unchanged and introduced the 2025 profit forecast of 304 million yuan for the first time. The current stock price corresponds to 2024/2025 16.0x/14.4x price-earnings ratio. We maintain our industry rating and target price of 43.10 yuan, which corresponds to a price-earnings ratio of 20.8x/18.7x in 2024/2025, with an upward range of 29.8% compared to the current stock price.
risks
Geopolitical risks, the risk of rising raw material prices, and the penetration of high-end models fell short of expectations.