2023 results are in line with our expectations
The company announced 2023 results: revenue for the full year of 2023 was 36.423 billion yuan, up 13.67% year on year; 4Q single quarter revenue was 9.163 billion yuan, up 11.00% year on year; net profit due to mother for the full year of 2023 was 3.274 billion yuan, up 28.99% year on year; 4Q single quarter net profit was 807 million yuan, up 39.98% year on year; the results were in line with our expectations.
Profitability continued to increase: The gross profit margin for the full year of 2023 was 22.05%, up 1.39ppt year on year, and the net profit margin on sales was 9.53%, up 1.32ppt year on year, mainly due to the increase in the scale effect of the coal machine business.
Development trends
The coal machine business benefits from the intelligent transformation of downstream coal mines. The revenue of the coal machine sector in 2023 was +12.51% year-on-year to 18.854 billion yuan, continuing to set a record high for this business. The net profit of the coal machine sector in 2023 was 3,052 billion yuan, an increase of 21.48% over the previous year. The scale effect of coal mills was released, and profitability remained strong, contributing to the main performance. Since 2020, the company's coal machine business has continued to flourish. We believe that the intelligent transformation of coal mines is an important driving factor. The intelligent transformation of coal mines has shortened the equipment renewal cycle and maintained a high level of industry prosperity. We believe that the completion rate of intelligent transformation of large-scale domestic coal mines is about 60%, and the intelligent transformation is expected to reach 70%-80% by 2025. The internationalization process of the company's coal machine equipment is also progressing steadily. In 2023, the company's international market orders reached 1.36 billion yuan, an increase of 40% over the previous year.
The auto parts business remains stable, and the transformation to electrification is accelerating. In 2023, the auto parts sector's revenue was 17.569 billion yuan, up 14.94% year on year, and realized net profit to mother of 222 million yuan, down 26.6% year on year.
The decline in the net profit of the auto zero business was mainly due to the impact of ASIMCO's goodwill impairment preparation plan mentioned that the auto parts sector obtained asset disposal income in the same period last year. Excluding this impact, the net profit of the auto zero business increased by 140 million yuan over the same period last year, mainly due to cost reduction and efficiency of SEG asset restructuring. The company's auto parts business actively embraces new energy electrification: 1) ASIMCO's new energy components business revenue of 390 million yuan in 2023, with a year-on-year increase of 100%. The intelligent air suspension system was successfully developed and introduced by potential suppliers to many leading OEMs; 2) Songe's new energy drive motor business accelerated, and 800V high-voltage flat wire adhesive rotor products were successfully mass-produced and mass-supplied, with the ability to industrialize new energy electric drives.
Profit forecasting and valuation
We kept the profit forecast for 2024 basically unchanged, and introduced a profit forecast of 3,998 billion yuan for 2025; the current A share price corresponds to a price-earnings ratio of 6.9 times/6.3 times 2024/2025. The current H share price corresponds to a price-earnings ratio of 4.1/3.6 times in 2024/2025. A-shares remain outperforming the industry rating and target price of 16.85 yuan, corresponding to 8.3 times the price-earnings ratio of 2024 and 7.5 times the price-earnings ratio of 2025. There is 19.8% room for growth compared to the current stock price. H shares remain outperforming the industry rating and the target price of HK$9.70, corresponding to 4.2 times the price-earnings ratio of 2024 and 3.7 times the price-earnings ratio of 2025. There is 3.2% room for growth compared to the current stock price.
risks
Coal companies' intelligent capital expenditure fell short of expectations; the price increase of raw materials exceeded expectations.