Incidents:
On April 12, 2024, Double Ring Drive released its 2023 annual report. In '23, the company achieved revenue of 8,074 billion yuan, an increase of 18.08%, and net profit to mother of 816 million yuan, an increase of 40.26%. The annual gross profit margin and net margin reached 22.24% and 10.33%, respectively, up 1.16 and 1.76pct from the previous year.
Key points of investment:
The traditional vehicle business is growing rapidly, and the new energy cycle problem has a low base effect. In 2023, the passenger car gear business revenue was 4.223 billion yuan, an increase of 15.66% over the previous year. Among them, revenue from new energy vehicles and traditional vehicle gears was 22.29,20 billion yuan, an increase of 16.46%\ 15.15%. Within the industry, against the backdrop of traditional fuel vehicles growing -0.65% in 23 years, the company's traditional vehicles achieved a growth rate of more than 15%, demonstrating the company's solid business foundation. In terms of new energy vehicles, the company's growth rate in 23 was weaker than the 24.61% growth rate of the pure electric market. The main reason was the weakening of the increase caused by downstream inventory removal of new energy vehicles in the first half of '23. As related issues weaken in subsequent years, it will have a low base effect in the future.
Commercial vehicles automatically became rapid, and robotics and Minsheng Gear created a new growth curve. In 2023, the company's commercial vehicle, Minsheng, and robot-related business revenue reached 8.8\ 3.79\ 556 billion yuan respectively, an increase of 71.25%\ 87.47%\ 45.62%. Commercial vehicles are mainly incremental effects of the shift from manual transmissions to automatic transmissions. As a new business cultivated by the company, the Minsheng Gear and Robot Reducer business continues to accelerate in domestic replacement and new customer development. With the expansion of future downstream robot usage scenarios and the development of Minsheng Gear application scenarios, the prospects remain optimistic. Automatic transmissions for commercial vehicles are still in their infancy, and the company's main customers, ZF and others, continue to take the lead, and it is expected that they will continue to grow rapidly in the future.
High barriers+overseas expansion + efficiency, profit margins and operating cash flow continue to increase. As a domestic supplier of high-end electric drive gears, the company has high barriers in the field of process technology, and its products mainly cover the middle and high-end markets; at the same time, it continues to develop diversified international brands through global TIER1 ZF and Schaeffler. The company's management continues to improve management efficiency, form refined management, and continuously improve human efficiency. Multi-faceted guarantees drive the company's gross profit margin and net interest rate to continue to rise, and drive operating cash flow to continue to rise. The company's net operating cash flow in 2023 was 1,572 million, nearly double the net profit level, up 29.12% from 2022.
Investment advice and profit forecasting
As a leading domestic supplier of electric drive gears and robot speed reducers for new energy vehicles, the company continues to explore domestic and foreign markets, and benefits from the automatic transformation trend of commercial vehicles and the rapid development of robotics and livelihood businesses. It is estimated that in 2024-2026, the company's net profit to mother will be 10.44\ 13.66\ 16.64 billion yuan, an increase of 27.84%\ 30.91%\ 21.77%, corresponding to EPS 1.22\ 1.60\ 1.95 yuan. Maintain a “buy” rating.
Risk warning
New energy sales fell short of expectations, overseas expansion fell short of expectations, robotics and livelihood businesses fell short of expectations, etc.