Core views:
The company released its 2023 annual report. In '23, the company achieved operating income of 10.208 billion yuan, a year-on-year decrease of 15%; net profit to mother was 1,007 billion yuan, an increase of 11.14% over the previous year.
Intelligent manufacturing equipment goes overseas faster, and profitability increases. The company's intelligent manufacturing business revenue in '23 was 3.19 billion yuan, down 3% year on year, and gross profit margin was 33.93%, up 1.65 percentage points from the previous year. Sales of high-end products such as ultra-high power fiber laser cutting intelligent equipment and large-format high-power laser cutting intelligent equipment increased 25% year-on-year in high-end overseas markets such as Europe and Southeast Asia, and the market share continued to increase.
The connectivity business is highly competitive, and 800G products can be delivered in small batches. The company has been ranked among the top ten competitive optical devices in China for more than ten years. In 2023, the company's connectivity business revenue was 3.11 billion yuan, a year-on-year decrease of 45.52%. The decline in revenue was mainly affected by the 5G construction cycle, and the scale of network terminal business delivery was reduced. In the field of AIGC applications, it helps increase global demand for computing power in the digital age. A full range of optical modules of 400G and below were delivered on a large scale, and entered many leading Internet vendors at home and abroad; 800G products carried out interconnection tests to achieve small-batch delivery.
New energy vehicles drive the company's perception of rapid business growth. In 2023, the company's perception business achieved revenue of 3.248 billion yuan, an increase of 40.02% over the previous year, and sales of new energy and its upstream and downstream industry chains accounted for more than 60%. PTC's NEV thermal management system business continues to grow, covering all domestic NEV brands and joint venture brands.
Profit forecast and investment advice: Huagong Technology's net profit for 24-26 is estimated to be 1,200/14.43/17.39 billion yuan, respectively. Considering the company's leading position in many industries, and the optical module market share ranking is increasing year by year, Huagong Technology was given a PE valuation of 30 times the net profit returned to mother in 24 years, corresponding to a reasonable value of 35.81 yuan/share, giving it a “buy” rating.
Risk warning: 5G base station and data center construction fell short of expectations; competition in the optical module market intensified; penetration rate of new energy vehicles fell short of expectations; PTC heater routes were replaced by heat pump routes.