Revenue in 2023 increased 11.02% year over year, and net profit to mother increased 11.42% year over year. In 2023, the company achieved revenue of 12.930 billion yuan, up 11.02% year on year; comprehensive gross profit margin of 36.89%, up 1.87 pct year on year; net profit to mother of 1,393 billion yuan, up 11.42% year on year.
In 2023, it is proposed to distribute a cash dividend of 0.439 yuan (tax included) to all shareholders, with a cash dividend ratio of 32.86%.
The rate increased by 0.62 pct year-on-year during 2023. In 2023, the company's rate for the period was 18.71%, an increase of 0.62 pct year-on-year. Sales rates, management rates, and financial rates have all increased to varying degrees, and R&D rates have declined year-on-year.
Let's take a look specifically:
(1) The sales rate was 3.75%, an increase of 0.27pct over the previous year. (2) The management fee rate was 9.37%, an increase of 0.09pct over the previous year.
(3) The financial rate was 0.38%, an increase of 0.35pct over the previous year. (4) R&D fee rate 5.21%, down 0.09pct year on year.
Revenue for the fourth quarter of 2023 increased 11.63% year over year, and net profit to mother increased 15.16% year over year. In the fourth quarter of 2023, the company achieved revenue of 2,999 billion yuan, up 11.63% year on year; comprehensive gross profit margin of 41.19%, up 3.96 pct year on year; net profit to mother of 325 million yuan, up 15.16% year on year. We believe that the growth rate of the company's net profit to mother is higher than the revenue growth rate, mainly due to the 3.96pct increase in gross margin over the same period last year, etc.
The rate increased by 3.71 pct year-on-year during the fourth quarter of 2023. In the fourth quarter of 2023, the company's rate for the period was 23.42%, an increase of 3.71 pct year-on-year. R&D rates, management rates, and sales rates increased year-on-year, and financial rates decreased year-on-year.
Let's take a look specifically:
(1) The sales rate was 4.96%, up 1.43pct year on year. (2) The management fee rate was 11.61%, an increase of 2.71 pct over the previous year.
(3) The R&D rate was 6.97%, an increase of 1.38pct over the previous year. (4) The financial rate was -0.12%, a year-on-year decrease of 1.81 pct.
The market share continues to increase, and the leading global relay market position is stable. According to the 2023 annual report of Hongfa Co., Ltd., quoting the “2023 China Electromagnetic Relay Market Competition Research Report” issued by Zhiduoxing Consultants, the global electromagnetic relay market size in 2023 was about 54.0 billion yuan, an increase of 3.6% over the previous year. Among them, China's electromagnetic relay market size was about 37.18 billion yuan, an increase of 5.1% over the previous year. The company's relay products achieved revenue of 11.657 billion yuan, an increase of 11.04% over the previous year, higher than the industry's growth rate. The gross profit margin was 38.72%, up 2.18pct year over year.
Let's look at it downstream:
(1) Home appliances: Fully introduced key customers such as Midea, Supor, Joyang, etc., and the global market share of power relays increased to 31.6%;
(2) New energy: The share of key customers for photovoltaic inverters reached 66%, maintaining the lead in the photovoltaic storage and charging new energy market;
(3) Automobiles: HVDC relays increased by 29.3%, and were certified by Volkswagen, BMW, Volvo, Mercedes-Benz, etc., and the global market share increased to more than 40%.
Traditional automotive relays have grown steadily, successfully entering India's Hyundai automotive system, and the global market share has increased to 20%; (4) Industry: Major customer strategies have achieved remarkable results, strengthened cooperation with Siemens, Schneider, and Phoenix, and achieved major breakthroughs in the Eastern European and domestic wind power markets.
We believe that with strong growth in smart homes, industrial automation, and photovoltaics, the rapid development of intelligent global electric meters, intelligent automobiles and new energy vehicles, and the spread of 5G communication, the electromagnetic relay market will maintain a good development trend, and the company is expected to benefit deeply as a global relay leader.
Overseas expansion continues to advance. In 2023, overseas revenue was 4.569 billion yuan, up 5.61% year-on-year. The gross profit margin was 40.94%, up 2.32pct year over year. Look at the subregions:
(1) Indonesia: In 2023, Indonesia Hongfa's sales repayment was 244 million yuan, up 157% year on year; net profit exceeded 30 million yuan, up 89% year on year. Indonesia's Hongfa Phase II plant was put into use, increasing production capacity by 40% to achieve overseas manufacturing of HVDC products; (2) Germany: Hongfa's German factory was formally established to meet the supply chain localization requirements of core customers, enhance the internationalization level and overall competitiveness of the supply chain, and enhance global brand awareness.
Profit forecasting and investment advice. We expect the company's net profit to be 1,628 billion yuan, 1.911 billion yuan, and 2,243 billion yuan respectively in 2024-2026. Earnings per share were $1.56, $1.83, and $2.15. Based on the company's leading position in relays in the world, the rapid expansion of NEV customers, the expansion of the overseas high-end market for automotive relays, the company's overall growth, and peer valuation level, the company was given 20-25 times PE in 2024, corresponding to a reasonable price range of 31.20 yuan to 39.00 yuan. Maintain an “better than the market” rating.
Risk warning. Overseas car companies' entry into the market fell short of expectations, the risk of fluctuations in the US dollar exchange rate, and the risk of market competition.