Incidents:
The company released its 2023 annual report. In 2023, it achieved revenue of 10.511 billion yuan, net profit to mother of 1.01 billion yuan, +33.47% year on year, 23Q4 achieved revenue of 2,743 billion yuan, +2.22% year on month, -3.79% month on month, net profit to mother 406 million yuan, +31.91% year on month, and +41.82% month on month.
Cost reduction hedged the impact of product price cuts, and the company's profit was in line with expectations
Despite the decline in structural component product prices in 2023, the company's profitability remained outstanding. The net profit margin for the whole year reached 11.42%, an increase of 1.01 pct over the previous year. We believe that during the profit pressure phase of the industry, the company's profit level continues to rise because: 1) the company's cost reduction strategy has been effective. The company reduces raw material costs through strategies such as signing long-term agreements and dynamic screening and elimination, while improving product yield, optimizing product processes, improving production costs, and hedging the impact of product price cuts; 2) the company's 23Q4 profit was affected by factors such as VAT refunds, which improved significantly over the same period last year.
The company's shipments continue to grow, and its market position remains leading
In 2023, the company's production and sales increased year-on-year, with output +2.07% year-on-year, sales volume +3.46%, and the production and sales rate reached 100.3%, maintaining a high position. The company's customers include domestic and foreign power battery and energy storage battery companies, such as Ningde Times, China Airlines, LG, Panasonic, Northvolt, Samsung, and Everweft Lithium Energy. In the future, with the rapid expansion of the NEV and energy storage markets, the steady development of key customers will lay the foundation for the company's future growth in performance scale and market share.
Production is being actively expanded at home and abroad, and overseas bases are expected to contribute to performance growth. On January 6, the company announced that it plans to invest 1.2 billion yuan to build the 14th production base in Shenzhen to continue to deepen the company's layout in key areas of the South China industry, with an estimated annual output value of 3.3 billion yuan after delivery; the company has built 3 overseas production bases, of which German and Swedish bases are in the trial production stage for supporting customers; and the Hungarian production base has reached full production. With the completion and delivery of overseas bases, the company will gradually release production capacity according to customer needs and obtain more orders from overseas customers, which is expected to increase profits.
Profit Forecasts, Valuations, and Ratings
We expect the company's 2024-2026 revenue to be 132.04/160.43/19.059 billion yuan respectively, with year-on-year growth rates of 25.61%/21.50%/18.80%, net profit to mother of 14.00/17.26/ 2.068 billion yuan respectively, corresponding growth rates of 16.61%/23.26%/19.81% for EPS, 5.19/6.39/7.66 yuan/share respectively, and a 3-year CAGR of 19.9%, corresponding PE is 17/14/ 12 times Given that the company is a leader in the structural parts industry, its profitability is superior to the industry average, and the overseas market is expanding smoothly. Referring to comparable company valuations, we gave the company 20 times PE in 2024, with a target price of 103.72 yuan, maintaining a “buy” rating.
Risk warning: NEV sales fall short of expectations; industry competition increases risk.