Key points of investment
Huaguang New Materials achieved operating income of 1,415 billion yuan in 2023, +15.96% year-on-year; net profit to mother was 42 million yuan, +377.19% year-on-year. 23Q4 achieved revenue of 364 million yuan in a single quarter, +7.06% year over year; net profit to mother was 0.04 billion yuan, -80.46% year over year. The negative year-on-year increase in net profit to mother in 23Q4 was mainly due to the high profit base of 22Q4.
New racetracks such as new energy vehicles and electronics accelerated, and revenue continued to rise. In 2023, the company actively expanded new tracks such as new energy vehicles and electronics on the basis of consolidating traditional advantages such as refrigeration, HVAC, power and electricity. Revenue continued to increase. Among them, the NEV sector achieved revenue of 64 million yuan, +37.87% year over year, and the electronics sector achieved revenue of 214 million yuan, +67.64% year over year. As the company continues to expand customers on emerging tracks in the future, the superposition company accelerates the commissioning and operation of fund-raising projects, and promotes a rapid increase in new production capacity, we are optimistic that the company's future performance will continue to grow rapidly.
Profits have achieved a high increase, and a series of measures to improve quality and efficiency are expected to drive future profitability to continue to increase the company's gross margin by 12.80% in 2023, up to +2.65pct. The main reason is that the price of raw silver stabilized and promoted the restoration of profit levels. In 2023, the company achieved net profit of 42 million yuan, or +377.19% over the same period last year. In 2024, the company will improve the efficiency of internal management decisions, refine staffing, and implement lean production through the operation of information systems such as SAP and MES. It is expected that a series of measures to improve quality and efficiency will continue to drive future profitability improvements.
It is proposed to launch a raw material hedging business, which is expected to reduce the risk of fluctuations in raw material prices. Raw materials account for a large share of the company's product costs, and fluctuations in bulk raw material prices have an obvious impact on the company's profit level. According to the company's announcement, the company plans to develop hedging services for non-ferrous metals copper and silver, with a contract value of no more than RMB 200 million. The development of the hedging business is expected to reduce the adverse effects of large fluctuations in raw material prices on the company's profitability and improve the stability of profit levels.
Actively rewarding shareholders with dividends helps boost market confidence
According to the company's announcement, the company's 2023 profit distribution plan is to distribute a cash dividend of 1.50 yuan (tax included) for every 10 shares, with a total cash dividend of about 13 million yuan (tax included), accounting for 30.77% of the net profit attributable to the mother. The company actively distributes cash dividends to shareholders, which helps increase market confidence.
Profit forecasting and valuation
The overall revenue for 2024-2026 is expected to be 1,825/22.71/2,741 billion yuan, respectively, with corresponding growth rates of 28.97%/24.44%/20.71%, and net profit to mother of 0.66/0.93/128 million yuan, respectively. The corresponding growth rates are 58.20%/40.87%/38.06%, respectively, and the corresponding EPS is 0.74/1.04/1.43 yuan, respectively. Maintain a “buy” rating.
Risk warning
Downstream demand from new businesses such as new energy vehicles and electronics falls short of expectations; there is a risk of fluctuating raw material prices.