Description of the event
The company released its 2023 annual report, with revenue of 1.77 billion yuan in 2023, up 22% year on year; net profit attributable to shareholders of the parent company was 330 million yuan, up 47% year on year; basically consistent with previous performance reports.
Incident comments
On an annual basis, the company's three major products all achieved revenue growth: 1) amorphous revenue of 1.37 billion yuan, an increase of 24% year on year, mainly benefiting from the increase in shipment volume. Shipments of 88,000 tons in 2023, an increase of 26% year on year, which is expected to benefit mainly from the gradual release of new production capacity built earlier; 2) shipment of nanocrystals was 50,000 tons, up 11% year on year, revenue of 230 million yuan, up 5% year on year; 3) magnetic powder shipments increased 20% year on year, revenue of 140 million yuan, up 12% year on year.
The company's gross margin in 2023 was 30.5%, up 3.7 pct year on year; among them, the gross margins of amorphous crystal and magnetic powder reached 34.2% and 11.2% respectively, increasing 3.7 pct and 9.4 pct year over year. Amorphous crystals are expected to benefit mainly from cost side improvements; nanocrystalline gross margin was 19.4%, a year-on-year decrease. The company's expense ratio for the 2023 period was 10.1%, which was basically the same as the previous year. Among them, the sales expense ratio, R&D expense ratio, and financial expense ratio were 3.0%, 5.4%, and -0.2%, respectively, increasing 0.3 pct, and the management expense ratio was 1.9%, down 0.6 pct year on year; the final profit growth rate exceeded the revenue growth rate.
At the same time, the company's overseas market progressed rapidly in 2023. Overseas revenue in 2023 was 650 million yuan, up 39% year on year, and the revenue share increased to about 38%; overseas gross profit margin was 34%, up 2.9 pct year on year; further verifying the company's leading amorphous position in the world.
On a quarterly basis, 2023Q4's revenue was 470 million yuan, up 12% year on year and 3% month on month; gross profit margin was 32%, up 3 pcts year over year, up 2 pct month on month; the increase in gross margin is expected to mainly benefit the 2023Q4 company's amorphous gross margin increase.
The company's expense ratio for the 2023Q4 period was 12.8%, up about 4.3 pct year on year. The sales expense ratio, management expense ratio, and R&D expense ratio were 3.4%, 2.0%, and 7.5%, respectively, up 0.4 pct, 0.3 pct, 4.5 pct year on year, and the financial expense ratio was -0.1%, down 0.9 pct year on year; 2023Q4's other income and net investment income increased year on year. Ultimately, the company's 2023Q4 profit growth rate surpassed the revenue growth rate.
In terms of other financial indicators, the company's net operating cash flow inflow in 2023 was 220 million yuan, a significant improvement over 2022.
Considering the trend of high efficiency and energy efficiency of transformers, the amorphous penetration rate is expected to continue to increase. As a global amorphous leader, the company can continue to benefit. In 2024, the company's net profit attributable to shareholders of the parent company is estimated to be 380 million yuan, which is about 26 times the PE valuation. Maintain a “buy” rating.
Risk warning
1. The number of tenders for amorphous transformers in the power grid fell short of expectations;
2. The company's market development for nanocrystalline products and magnetic powder products fell short of expectations.