Incidents:
On April 11, 2024, Shuanghuan Transmission released its 2023 annual report: in 2023, the company achieved revenue of 8.074 billion yuan, +18.1%; 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 on year, of which 2023Q4 achieved revenue of 2.202 billion yuan, +9.4% year on year; net profit to mother of 227 million yuan, +31.5% year on year.
Investment highlights:
Revenue grew rapidly in 2023, with “passenger car gear+commercial vehicle gear” two-wheel drive.
In 2023, the company achieved revenue of 8.074 billion yuan, or +18.1% over the same period, achieving relatively rapid growth. Mainly in 2023, the company's heavy truck automatic transmission gear business and new energy vehicle gear business all showed a good growth trend. By business, in 2023, the company's passenger car gear business achieved revenue of 4.22 billion yuan, +15.7% year over year; construction machinery gear business achieved revenue of 650 million yuan, -12% year over year; and commercial vehicle gear business achieved revenue of 800 million yuan, +71.3% year over year.
Net profit to mother in 2023 was +40.3% year-on-year, and profitability increased significantly. In 2023, the company's net profit to mother was 816 million yuan, +40.3% year-on-year. In terms of the company's profitability, in 2023, the company achieved a gross profit margin of 22.24% (+1.17pct year on year), a net interest rate of 10.33% (year-on-year +1.76pct), and a period expense ratio of 10.27% (year-on-year -0.58pct), mainly due to internal cost reduction and efficiency, independent innovation, etc. that the company continued to promote in 2023, effectively improving manufacturing capacity, reducing unit costs, and improving gross margin and period expense ratios.
“Passenger car gear+civil gear+robot reducer” are working together, and there is plenty of room for growth.
1) Passenger car gears. In the passenger car sector, the company has leading global electric vehicle manufacturers and benchmark customers in the automotive industry chain such as BYD, GAC, GM, Ford, NIO, ZF, Nidec, Schaeffler, Huichuan, and Borg Warner. The future passenger car business is expected to grow rapidly with high-quality customers. 2) People's livelihood gears. The company actively invests in the research and development of injection molding and related composite gears and small assemblies, and its market share in smart homes, vehicle parts, etc. Among them, the market share of the sweeper industry is growing rapidly. It is expected that Minsheng Gear will help the company achieve steady and continuous performance growth in the future. 3) Robotic speed reducer. The company's subsidiary, Huandong Technology, continues to increase its market share of domestic RV reducers with its R&D capabilities and batch delivery capabilities for robotic precision speed reducers. Furthermore, the company has successfully supplied harmonic speed reducers, and the product matrix has been continuously improved.
Profit forecast and investment rating Considering that the three major businesses of the company's passenger car gears, livelihood gear, and robot reducer businesses are all expected to maintain rapid growth in the future, we expect the company to achieve total operating income of 102.46, 124.81, and 14.359 billion yuan in 2024-2026, with year-on-year growth rates of 27%, 22%, and 15%; achieving net profit of 10.19, 12.53, and 1,479 billion yuan, with year-on-year growth rates of 25%, 23%, and 18%; EPS is 1.19, 1.47, and 1.73 yuan, corresponding to the PE estimate of the current stock price The values were 18, 15, and 12 times, respectively. They were covered for the first time, and a “gain” rating was given.
Risks suggest that raw material prices continue to rise; sales fall short of expectations; new customer expansion falls short of expectations; production capacity of new plants falls short of expectations; overseas market expansion falls short of expectations; and new product development progress falls short of expectations.