Revenue increased 24% year over year, and profitability is under pressure. The 3C business is expected to become a new growth point. In 2023, Lianying Laser released its annual report. In 2023, it achieved revenue of 3.512 billion yuan (yoy +24.44%), net profit of 286 million yuan (yoy +7.24%), deducting 250 million yuan (yoy +4.34%). Among them, Q4 achieved revenue of 958 million yuan (yoy +3.17%, qoq +12.10%) and net profit to mother of 338.905 million yuan (yoy -57.46%, qoq -36.66%). We expect the company's 2024-2026 EPS to be 1.12, 1.41, and 1.77 yuan respectively (the previous value was 1.14, 1.29, and 1.84 yuan in 2023-2025). Comparatively, the company Wind unanimously expected an average PE value of 16.8 times. Considering the company's technological leadership in the field of laser welding and multi-industry platform layout, the performance growth rate was high. The company was given 18 times PE in 24 years, with a target price of 20.16 yuan (previous value of 25.8 yuan), maintaining a “buy” rating.
Affected by the decline in the lithium battery boom, the profitability of the company's power and energy storage battery business declined. The gross margin in 2023 was 32.93% /yoy-3.01pct, and the net margin was 8.15% /yoy-1.31pct.
2023Q4 gross margin was 30.57% /yoy-5.37pct/qoq+0.39pct, and the net margin was 3.51% /yoy-5.06pct/qoq-2.76pct. The cost rate remained stable in 2023, with a management expense ratio of 13.81% /yoy-0.37pct, R&D expenses ratio 6.87% /yoy+0.03pct, and sales expenses ratio of 4.54% /yoy+0.26pct. The profitability of the power and energy storage battery business declined. In 2023, the company's power and energy storage battery business revenue was 2,954 million yuan/yoy +26.51%, with a gross profit margin of 30.40% /yoy-2.48pct; consumer electronics business revenue of 152 million yuan/yoy +13.2%, gross profit margin 46.68% /yoy+0.34pct; hardware and auto parts business revenue of 232 million yuan/yoy -2.04%, gross profit margin 41.94% /yoy-4.51pct.
The company's platform-based technology has significant advantages. Multiple downstream fields are working together to expand new application scenarios. The laser welding equipment industry is in a stage of rapid development. The company's platform-based technical advantages are remarkable, and many downstream application fields are expected to work together, mainly including: 1) 3C industry: on the one hand, the company lays out assembly lines for button batteries, and on the other hand, welding technology for small steel case batteries is expected to increase revenue; 2) Energy storage batteries and 4680 batteries bring horizontal expansion of the power battery industry; 3) Hardware and auto parts industry: localization brings increased application penetration; 4) and photovoltaics Industry: In recent years, the company has established Jiangsu Lianying Semiconductor Technology Co., Ltd. and Jiangsu Chuangying Solar Energy Technology Co., Ltd., respectively, to engage in R&D and production of laser equipment in the semiconductor and photovoltaic industries. It is expected that products will be launched on the market in 2024.
At the end of 23, orders in hand (excluding tax) were 4,048 billion yuan. The order structure is expected to be more balanced. By the end of 2023, the company's current orders (excluding tax) will reach 4 billion yuan, and new production capacity will be put into operation one after another, providing strong support for the sustainability of the company's performance. The company grasps industry trends. On the one hand, it focuses on equipment demand brought about by new products including large cylindrical batteries and solid-state batteries, and on the other hand, it is increasing its market development efforts for non-lithium battery businesses such as the consumer electronics industry, fuel cell, and sensor industries. The plan is to increase the share of non-lithium battery business to more than 25% of new orders in 2024, and the company's business structure is more balanced.
Risk warning: The rapid rise in upstream costs affects demand, which in turn affects the progress of battery production expansion; the risk of rising raw material costs; the risk of single customer dependency.