2023 results fall short of our expectations
The company announced its 2023 results: achieving revenue of 4,517 billion yuan, up 7.57% year on year; net profit to mother of 308 million yuan, up 30.77% year on year; deducted non-net profit of 264 million yuan, down 8.27% year on year (non-recurring profit and loss mainly comprised profit and loss of 75.26 million yuan from fair value changes, 33.63 million yuan in government subsidies, and 52.88 million yuan in non-current asset disposal). The performance fell short of our expectations, mainly due to high costs during the period. Corresponding 4Q23 revenue was 1,446 billion yuan, up 29.90% year on year; net profit to mother was 70.93 million yuan, up 927.5% year on year. The company paid a cash dividend of 0.29 yuan/share (tax included) in 2023.
Development trends
The consumer electronics business bucked the trend, and automotive products grew rapidly. In 2023, the company's consumer electronics and automotive products all achieved year-on-year growth, including: 1) Smart terminal functional parts and precision structural parts and modules:
Revenue increased 5.1% year over year to $2,617 billion. Against the backdrop of weak demand in the consumer electronics industry, the company achieved contrarian growth through product category expansion and customer share growth; 2) New energy vehicle products:
Revenue increased 23.71% year over year to 1,488 billion yuan. We judge that this was mainly due to the continuous increase in bike value for the company's new energy customers in North America; 3) Information storage products: revenue fell 18.67% year on year to 347 million yuan, and we judge that it was mainly due to the decline in customer demand. In terms of gross margin, the gross margin of consumer electronics products was stable; the gross margin of NEV products fell 7.82ppt to 26.96% year on year, which we judge was mainly due to the expansion of overseas production capacity; the gross margin of information storage products fell 9.97ppt to 12.15% year on year, and we judge that the main reason was the decline in revenue.
With high R&D investment and production capacity expansion, we are optimistic that new energy vehicles, consumer electronics, and emerging businesses will blossom more. The company has always maintained a high investment in R&D, with R&D expenses of 362 million yuan in 2023, helping to innovate and upgrade consumer electronics and new energy vehicle products, as well as the layout of various businesses such as hydrogen fuel cell core components, new energy wireless charging systems, and energy storage. In terms of consumer electronics, the company built a new factory in Vietnam to increase consumer electronics production capacity. We are optimistic that the company's revenue for metal parts and die-cut parts will improve year over year as terminal demand picks up; in terms of new energy vehicles, the company is speeding up layout and capacity expansion in North America, Southeast Asia, etc., and we are optimistic about the company's overseas supply chain delivery capacity increase. In addition, the company announced that the 2023 hydrogen fuel cell metal bipolar plate has now initially completed the construction of a full-process production line. Hydrogen fuel cell membrane electrode products are being sampled and tested with customers, and we are optimistic about the growth space for the company's new business.
Profit forecasting and valuation
Considering the uncertainty about the recovery in consumer electronics demand, we lowered our 2024 net profit forecast by 10.4% to 401 million yuan, and introduced a net profit forecast of 481 million yuan for 2025. The current stock price corresponds to 24.5/20.4 times P/E for 2024/2025. We are optimistic about the company's long-term growth space, maintaining an outperforming industry rating and a target price of 16.0 yuan corresponding to 26.8/22.4 times P/E in 2024/2025, with 9.4% upside compared to the current stock price.
risks
Demand for consumer electronics is sluggish; NEV customer shipments fall short of expectations; Weber Precision continues to lose money.