Event Overview: According to the 2023 Annual Report, 2023 revenue was 8.07 billion yuan, +18.1% year over year; net profit to mother was 816 million yuan, +40.3% year over year; net profit after deducting non-return to mother was 803 million yuan, +41.6% year over year. Among them, 2023Q4 revenue was 2.20 billion yuan, +9.4% YoY, +0.7% month-on-month; net profit to mother was 227 million yuan, +31.5% YoY; +2.8% month-on-month; net profit without return to mother was 253 million yuan, +34.5% YoY; and +21.1% month-on-month.
24Q4 results were in line with expectations, and profit increased significantly. 1) Revenue side: 2023Q4 revenue of 2.20 billion yuan, +9.4% YoY, +0.7% month-on-month, the year-on-year increase was mainly due to the increase in NEV gear revenue; 2) Profit side; the net profit from 2023Q4 was 227 million yuan, after deducting non-current asset disposal gains and losses, +34.5% YoY; +21.1% month-on-month, after deducting that the non-profit growth rate was significantly higher than the revenue growth rate, mainly due to the increase in gross profit. The gross margin of 2023Q4 reached 24.6%, +2.1pct year over year and +2.8pct month-on-month. Benefiting from the increase in the share of new energy sources, resulting in improved product structure, cost reduction and efficiency, and profit restoration for commercial vehicles and construction machinery gears, the gross margin increased significantly. 3) On the cost side, the 2023Q4 sales/management/R&D/finance expenses rates were 1.2%/4.9%/5.5%/0.5%, respectively, +0.3/+1.4/+1.1/+0.5pct, respectively. The year-end cost rate increased slightly.
Global customers continue to develop 2024 and accelerate overseas factory construction. In 2023, the company sold 16.57 million new energy gears, accounting for 27.6% of revenue, and the domestic NEV market share was 40% to 50%. At the same time, the company actively expanded overseas customers and successively obtained new energy vehicle gear projects from customers such as Toyota and a well-known European luxury brand. By the end of 2023, the company had built a production capacity of 5 million sets of drive gears for new energy vehicles, and is steadily advancing the construction of a factory in Hungary. In 2024, on the one hand, the company will rely on the domestic production capacity of 5 million sets of new energy gears to continue to benefit from domestic new energy growth, and on the other hand, actively promote the construction of a production base in Hungary, introduce outstanding talents from Europe, strengthen the team's internationalization level, and help expand globally.
Huandong Technology plans to spin-off the robotic reducer Star Sea. In 2023, the subsidiary Huandong Technology continued to increase its domestic RV reducer market share with its robotic precision reducer R&D capabilities and batch delivery capabilities, and harmonic reducer products have also been successfully supplied. 2021/2022/2023Q1-3 Huadong Technology's revenue was 0.9/17/250 million yuan respectively, with net interest rates of 22.1%/29.6%/23.7%, and strong profitability. In March 2024, the company announced a plan for the spin-off of Huandong Technology. It plans to split Huandong Technology and go public on the Science and Technology Innovation Board, and establish Zhejiang Huandong Technology Research & Development Co., Ltd., a wholly-owned subsidiary of Huandong Technology, to explore and develop precision speed reducers with new structures. We believe that this spin-off has provided more diversified financing channels for Huandong Technology and will help accelerate domestic replacement of the robotic joint business. As Huandong Technology's future profitability increases, Shuanghuan's overall profit level as the parent company is also expected to increase.
Investment suggestions: Accelerated globalization+development of people's livelihood gears and robotic joints, optimistic about the company's medium- to long-term growth, and adjust profit forecasts. The estimated revenue for 2024-2026 is 103.2/124.5/14.94 billion yuan, respectively, net profit to mother is 10.5/13.3/1.65 billion yuan, and EPS is 1.23/1.56/1.94 yuan respectively, corresponding to the closing price of 21.83 yuan/share on April 11, 2024. PE is 18/14/11 times, respectively, maintaining the “recommended” rating.
Risk warning: The increase in the penetration rate of new energy passenger vehicles fell short of expectations, the growth rate of RV reducers sales fell short of expectations, fluctuations in raw material prices exceeded expectations, and overseas factory construction progress fell short of expectations.