Incident: The company achieved operating income of 3.63 billion yuan in 2023, an increase of 28.7% over the previous year; achieved net profit of 210 million yuan, an increase of 9.3% over the previous year; net profit after deducting non-return to mother was 200 million yuan, an increase of 17% over the previous year. In the fourth quarter of 2023, the company achieved revenue of 1.11 billion yuan, an increase of 45.3% year on year; net profit after deduction of 40 million yuan, a year-on-year decrease of 9.1%; net profit after deduction of 50 million yuan, up 12.3% year on year, mainly during the reporting period: 1) profit and loss from disposal of non-current assets decreased by 4.118 million yuan year on year due to end-of-life losses; 2) accounting for the holding subsidiary Dingshuo Tongbang's performance compensation of 16.761 million yuan.
The gross margin continues to rise, and the R&D cost ratio remains high. Profit side: In 2023, the company's gross sales margin/net margin was 22.3%/6%, respectively, +2.3/-0.8pp; single Q4 gross margin/net margin was 24.6%/4.5%, respectively, +0.1/-3.8pp. Expense side: The company's 2023 sales/management (excluding R&D) /finance expense ratios were 2.7%/5.7%/0.4%, respectively, -0.1 pp/+0.2 pp/+0.6 pp, respectively. Among them, the increase in financial expenses was mainly due to a year-on-year increase of 8.839 million yuan in interest expenses on current loans and a year-on-year decrease of 15.579 million yuan in exchange earnings. The company's R&D investment continued to increase. The R&D expenditure rate was 5.1%, an increase of 0.6pp over the previous year.
Overseas demand for transformers is strong, and the pace of the company going overseas is speeding up. Affected by the upgrading of centralized and distributed new energy installations and the upgrading of old European and American power grid equipment, overseas transformer demand is boosted, and leading manufacturers such as ABB and Siemens are expanding production capacity slowly, and there is an imbalance between supply and demand. The company achieved revenue of 2.13 billion yuan for new energy products in 2023, an increase of 66.7% over the previous year, accounting for 59% of revenue. Among them, revenue from a single category of boosting and conversion exceeded 1 billion yuan. The company continues to break through major overseas customers, and its direct export products are used in industries, lighting, power grids, etc. In 2023, overseas revenue was 980 million yuan, up 6.1% year on year, gross margin was 30.9%, up 3.8 pp year on year, and overseas gross margin was 11.7 pp higher than domestic. The Booster Products Company has achieved a breakthrough from indirect exports to direct exports from major supporting customers. The gross margin of direct exports is higher. As the company's share of overseas revenue continues to rise, it is expected to drive the company's overall gross margin to continue to rise.
Multiple products have welcomed breakthroughs, the industrial layout has been improved, and the product structure is continuously optimized. During the reporting period, the company completed the expansion of new energy product categories such as photovoltaic smart box-type substations and all-in-one computers, completed the development of Panamanian power supplies, etc., and successfully expanded from the original core components to complete equipment, and achieved a breakthrough of 0 to 1. The company's first oil-immersed power transformer digital factory was fully put into operation. Increased automation of production lines promoted labor costs and a decrease in the share of manufacturing expenses in revenue. Along with the increase in the share of high-margin transformer products compared to low-margin inductor products, the company's “product structure optimization+production efficiency improvement” boosted the overall profit level.
Profit forecasting and investment advice. The company's revenue for 2024-2026 is estimated to be 4.59 billion yuan, 5.74 billion yuan, and 6.73 billion yuan, respectively, and the year-on-year growth rate of net profit to mother for the next three years is 56.3%/33%/18.1%, respectively. The company's product structure continues to be optimized, the proportion of high-margin products has increased, the overseas transformer market space is broad, and the pace of the company's overseas expansion is accelerated. It is expected to fully benefit and maintain the “buy” rating.
Risk warning: risk of rising raw material prices; risk of production capacity expansion falling short of expectations; risk of intense competition for overseas transformers; risk of exchange rate fluctuations affecting the company's overseas business.