Key investment points: The company released its 2023 annual report, and achieved operating income of 8.074 billion yuan for the full year of 2023, +18.1% year-on-year; realized net profit of 816 million yuan, +40.3% year-on-year. On a quarterly basis, the company achieved revenue of 2.02 billion yuan in 23Q4, +9.4%/+0.7% YoY; realized net profit to mother of 227 million yuan, +31.5%/+2.8% YoY. The performance was in line with expectations.
The company's revenue grew steadily, and passenger cars, commercial vehicles, and consumer gear contributed more. 23 The company's revenue for the whole year was 8.074 billion yuan, +18.1% year over year. Looking at the specific business segment: passenger car revenue was 4.223 billion yuan, +15.7% year over year, of which new energy revenue was 2,229 billion yuan, +16.5% year over year. We determined that it was mainly affected by downstream inventory digestion in the first half of the year, and the impact was basically eliminated in the second half of the year, and growth rate recovered; fuel vehicle revenue was 1,994 billion yuan, +14.8% year over year, with impressive performance with a strong customer structure. Commercial vehicle revenue was 880 million yuan, +71.3% year-on-year, benefiting from the recovery of the commercial vehicle industry and an increase in AMT shipments of superimposed heavy trucks. Construction machinery revenue was 647 million yuan, -12.0% year-on-year, mainly affected by the downstream boom; Minsheng Gear's revenue was 379 million yuan, +87.5% year over year. The increase was mainly due to the merger of Sanduo in the second half of '22 and the full year in '23; the revenue from speed reducers and other revenue was 556 million yuan, +21.7% year on year, and the RV reducer market share continued to increase.
Reduce costs and increase efficiency from multiple angles, and profitability continues to improve. In '23, the company achieved an overall gross profit margin of 22.2%, +1.2pct year on year; achieved a net profit margin of 10.1% to mother, +1.6pct year on year. Profitability improvements are impressive, mainly reflecting the scale effect of the gear industry under the asset-heavy nature of the gear industry. At the same time, the company continues to reduce costs and increase efficiency, improving the quality of operations from various perspectives of technology, process, and management, which is a 20% increase in per capita efficiency compared to '22. Looking at a single quarter, Q4 achieved an overall gross profit margin of 24.6%, +2.1pct/+2.9pct YoY; achieved a net profit margin of 10.3% to mother, +1.7pct/+0.2pct YoY. The increase in profitability in a single quarter is even more obvious. In addition to the above improvements in business quality, there are also seasonal factors such as inventory impairment charges recovery and one-time revenue recognition at the end of the year.
Insist on increasing investment in R&D and consolidating technological leadership. From the perspective of cost rates, the company's sales, management, R&D, and financial expenses in '23 were 1.0%/4.1%/4.8%/0.4%, respectively, -0.0pct/-0.4pct/+0.4pct/-0.6pct. As downstream customers' requirements for gears are increasing, the company established the Environmental Research Transmission Research Institute to continuously increase investment in R&D. In '23, the company completed research and development of new energy electric drive new structural gears with high meshing and low noise requirements, new structural differential assemblies, and high-efficiency transmission e-Bike mid-motor drive gears, etc., to consolidate its competitive advantage in the gear field.
Looking forward to the future, we are optimistic about the company's multi-dimensional growth in terms of globalization, livelihood gear, and robotics as a precision gear platform company. In terms of globalization, in 24, the company will ensure that the construction of the Hungarian production base progresses as scheduled, laying a solid foundation for global market expansion. In the field of minsheng gears, the company actively invests in the research and development of injection-molded gears and small assemblies, and its share in the fields of smart homes and vehicle parts has increased one after another. In particular, the market share in the sweeper industry has grown rapidly, contributing to new volume. In the field of robotics, the subsidiary Environmental Technology continues to increase its market share of domestic RV reducers, successfully supplied harmonic speed reducers, and explored and developed precision speed reducers with new structures, laying a solid foundation to meet the diverse needs of future robots for joints.
The profit forecast was slightly raised to maintain the “buy” rating. We expect the company to achieve net profit of 1,039/1,304 billion yuan in 2024-2025 (previous value of 1,028/1,301 billion yuan), adding the 2026 forecast of 1,534 billion yuan, a year-on-year growth rate of 27.2%/25.6%/17.6%, corresponding to the current PE of 18x/14x/12x, maintaining a “buy” rating.
Core risks: Downstream vehicle sales fall short of expectations, company capacity investment falls short of expectations, and development of the robot industry falls short of expectations.