Key elements of the report:
Event: On April 10, 2024, the company released its 2023 annual report. In 2023, the company achieved operating income of 2,879 million yuan, an increase of 47.68% year on year; net profit belonging to the parent company was 202 million yuan, an increase of 70.00% year on year. Among them, in the fourth quarter of 2023, the company achieved operating income of 594 million yuan, a year-on-year decrease of 15%, and realized net profit of 121 million yuan to mother, an increase of 90.03% over the previous year.
Investment highlights:
The home appliance business remained steady, the photovoltaic module business continued to expand, and the company's performance achieved relatively rapid growth.
(1) On the revenue side, in 2023, the company's home appliances/motors/photovoltaic/other business revenue was 7/1.97 billion yuan, accounting for 24%/6%/68%/1% of revenue, respectively, and +11%/+5%, respectively. The PV module business revenue achieved rapid growth, which further increased its share of the company's revenue, and was the main source of revenue; (2) In terms of gross margin, in 2023, the company's comprehensive gross margin was 14.94%, which was basically the same as the previous year. On a quarterly basis, the comprehensive gross margin for 23Q4 was 7.07%, which is expected to be due to factors such as year-end cost aggregation adjustments; by product, gross margins of home appliances/optical communications, light sensor modules/motor/photovoltaic modules were 32.84%/-1.1%/8.96%/9.3%, respectively, year-on-year change +0.87pct/-1.65pct/-2.03pct/+2.96pct; (3) On the cost side, the company's profit growth rate was significantly higher than operating Revenue growth rate. The company's expense ratio for the 2023 period was 6.79%, a year-on-year decrease of 1.28 pct. Among them, the sales expense rate/management expense rate/ financial expense rate/ R&D expense ratio changed by -0.31pct/-0.19pct/+0.15pct/-0.94pct, respectively.
The company's sales volume of photovoltaic modules reached nearly 1.5 GW in 2023. 2 GW photovoltaic production capacity has already been put into operation, and the continued release of production capacity is expected to drive the company's performance growth. According to the company's 2023 annual report, the company's production/sales volume in 2023 reached 1.47 GW, a year-on-year increase of 97%/120%. Fuller New Energy has achieved rapid growth in the PV module business revenue due to its product technology advantages and current small size. Within 2023, the company completed the issuance of convertible bonds and completed investment and construction of a 2GW photovoltaic module project, and officially began production at the end of January 2024.
The company's core home appliance parts market position is stable, and new categories continue to develop. China's domestic and foreign electronics sales continued to recover in 2023, and the company's home appliance parts business also achieved a certain growth. The company's thermal protectors and starters for refrigeration compressors continued to maintain its leading position in the industry, and thermostat products for small household appliances continued to penetrate. The company's motor business is expected to benefit from the rapid growth of new energy vehicles and the gradual rise of robots, drones, smart homes, etc. The company's market position for traditional home appliance components such as thermal protectors and starters is stable, and new categories continue to penetrate the market. The scale of the home appliance business is expected to maintain steady growth in 2024.
Profit forecast and investment advice: The company expects to achieve operating income of about 3 billion yuan in 2024, and a steady increase in operating profit and net profit. Since the company's energy storage business has not yet been implemented, we have adjusted the company's profit forecast for 2024-2025 and introduced a profit forecast for 2026. We expect the company's revenue for 2024-2026 to be 37.7/45.7 billion yuan, and net profit to the mother will be 2.4/29/350 million yuan respectively (the original profit forecast for 2024-2025 was 30/380 million yuan), corresponding to PE (as of April 10) of 12.5X, 10.5X, and 8.6X, respectively, maintaining the “buy” rating.
Risk factors: The decline in PV module prices exceeds expectations, leading to gross margin falling short of expectations, new energy customer expansion falling short of expectations, new capacity construction falling short of expectations, sharp fluctuations in raw material prices, etc.