Key points of investment

The company released its 2023 annual report: The company achieved revenue of 1.85 billion yuan in 2023, up 88.7% year on year, and net profit of 130 million yuan, up 2.0% year on year. Looking at a single quarter, Q4 2023 achieved revenue of 400 million yuan, a decrease of 16.3% year on year, and net profit to mother of 0.3 billion yuan, a decrease of 11.6% year on year. In terms of profitability, the company's 23 gross profit margin was 18.8%, a year-on-year decrease of 21.3 pct, a year-on-year net sales margin of 6.4%, and a year-on-year decrease of 5.4 pcts. The main reason for the decline in profitability is that the company's high-power power supply business is still in the investment period.

The advantages of sawing were consolidated, and the share of high-end products continued to expand: the company's sawing business achieved revenue of 670 million yuan in 2023, an increase of 7.5% over the previous year, and net profit of 160 million yuan, an increase of 16.6% over the previous year.

According to the company's annual report data, in 2023, the company's bimetallic band saw blade sales ranked first in China and the top three in the world, with a share of nearly 35% in the domestic market, and the company's products accounted for more than 40% of the export of Chinese products to overseas markets. As a leader in sawing, the company continues to benefit from the advantages of scale in the sawing industry under the trend of domestic substitution and products going overseas. The company's product structure continues to be upgraded. High-end sawing products accounted for 62% of sawing business revenue in 23 years, an increase of 9.6pct over the previous year. The growth of the high-margin business is expected to continue to increase the company's profitability in the future.

The power supply business is in the period of adjustment and layout, and high-power power supplies are expected to become a new driving force for growth: power supply business revenue of 1.17 billion yuan in 2023, with a loss of 0.26 billion yuan; of which consumer electronics power supply revenue was 1.03 billion yuan, gross margin was 4.5%; high-power power supply revenue was 140 million yuan, and gross margin was 2.1%. With high-power power supplies as an important development direction, the company is vigorously expanding product lines such as photovoltaic inverters, photovoltaic optimizers, energy storage converters, server power modules, household DC charging piles, and fast charging power modules. Based on the construction of AIGC and Huawei computing power centers, the country has ushered in an era of high computing power, and the company's data center power supply business is expected to benefit deeply. Profitability was briefly under pressure due to investment and construction of high-power power supply business production lines, low capacity utilization, and factors such as recruitment of new high-power power supply business employees, investment in R&D, and increased depreciation and amortization of fixed assets. Currently, the company's on-hand orders are guaranteed. In the future, with the orderly release of production capacity of the company's high-power power supplies and other production lines, and on-hand orders are delivered one after another, the company's power supply sector performance will continue to improve.

Profit forecast and investment rating: Affected by the company's production capacity climbing progress, we lowered our 24-25 profit forecast. We expect the company's 2024-2026 revenue to be 26.3/36.1/4 billion yuan (previous forecast value of 36.2/4.92 billion yuan for 24-25 years) and net profit to mother of 2.4/3.5/450 million yuan (previous forecast value of 30/4.1 billion yuan in 24-25 years), corresponding P/E is 19.8/13.6/10.6 times, taking into account the maintenance of the company's leading position in the sawing field and The development of the power supply market, and considering that the good cooperative relationship between the company and customers in the power supply field is expected to bring about long-term increases, maintaining a “buy” rating.

Risk warning: consumer electronics demand recovery falls short of expectations; new energy boom falls short of expectations; competition in cutting business intensifies