Net profit due to mother in 2023 was basically in line with our expectations, but gross margin fell short of our expectations
The company announced its 2023 results: operating income of 2,425 billion yuan, +14.6% year over year; net profit to mother of 745 million yuan, +2.0% year over year; net profit after deduction of 695 million yuan, -1.1% year over year. Non-recurring profit and loss mainly represented default compensation revenue of 37.35 million yuan. Net profit due to mother in 2023 was largely in line with our expectations, but gross margin was lower than our expectations. Looking at a single quarter, 4Q23 achieved revenue of 768 million yuan, +24.4% year-on-year; net profit to mother was 182 million yuan, +4.9% year-on-year.
Development trends
The revenue growth rate of various 2H23 businesses has recovered, and 4Q23 gross margin fell short of expectations. 1) Color sorter:
Revenue of 23 billion yuan, +19.4% year over year, 2H23 revenue of 912 million yuan, +30.3% year over year. We believe it is mainly due to the continuous improvement of the company's product competitiveness and domestic and overseas color sorter product sales in the second half of the year; 2) Dental CBCT: 23 year revenue of 756 million yuan, +5.51% year over year, 2H23 revenue of 453 million yuan, +8.5% year over year. We think the boom in the second half of the year has recovered, but the overall trend is still weak; 3) Industrial Testing: Revenue of 157 million yuan, year over year + 60.98%, 2H23 revenue of 76 million yuan, +74.4% year over year. We think it is mainly a low base+multiple application scenarios. In terms of gross margin, the gross margin of color sorter/dental CBCT/industrial inspection in 2023 was 49.29%/53.65%/56.56%, year-on-year, -0.17/-2.22/+5.32ppt, 2H23 color sorter/dental CBCT/industrial inspection gross margin was 48.58%/52.56%/62.42%, 4Q23 company's gross margin was 49.9%, year-on-year -4.1ppt. We judge that the sales volume of the main color sorter increased the proportion of low-end dental CBCT products (more additions) Dental clinics in second- and third-tier cities) + increased competition.
Annual cost control was better, and the 4Q23 sales/R&D expense ratio increased. In 2023, the company's sales/management/R&D/finance expense ratios were +0.9/-0.8/+0.3/+2.5ppt, respectively. The overall cost control was good, and the increase in financial expenses ratio was mainly due to a decrease in exchange earnings. The net interest rate in 2023 was 30.7%, -3.8ppt year over year. 4Q23's sales/management/R&D/finance expense ratios were compared to +4/-1.5/+1.9/-1.4ppt, respectively. Among them, the increase in sales expense ratio was mainly due to increased sales in 4Q23, and the increase in R&D cost ratio was mainly due to investment in the Meiya Cloud platform.
Cash flow has recovered sharply, and dividend rates have been maintained. In 2023, the company's operating cash flow was 675 million yuan, +114% year on year, and inventory control was good; accounts receivable at the end of 23 million yuan were 568 million yuan, +61% year over year, mainly due to increased overseas sales and slow repayment. We calculate the company's dividend payment rate of 82.7% in 2023 (84.6% last year), which remains high.
The smart factory was put into operation to increase the competitiveness of the color sorter market, and the dental CBCT boom is recovering. As the company's smart factory continues to be put into use, while improving the quality of the company's products, cost savings can partially benefit the downstream and enhance the competitiveness of the color sorter market; at the same time, we judge that the dental CBCT industry is continuing to recover in 2024, and there is still a lot of room for penetration.
Profit forecasting and valuation
As gross margin fell short of expectations, we lowered our 24-year net profit by 10.1% to $825 million, and introduced 25-year net profit of $927 million. The current stock price corresponds to the 2024/2025 price-earnings ratio of 20.7 times/18.4 times.
Maintaining an outperforming industry rating, considering the upward trend in the industry's valuation center, maintaining a target price of 23.35 yuan, corresponding to a price-earnings ratio of 25.0 times/22.2 times in 2024/2025, with 20.7% upside compared to the current stock price.
risks
Material prices have risen, overseas market expansion has not been smooth, exchange rate fluctuations are at risk, and CBCT competition has intensified.