Core views:
The performance was in line with expectations, and the increase in capacity utilization led to a recovery in gross margin. The company released its 2023 annual report. The company's revenue for the year 23 was 21,799 billion yuan, +20.9% year on year, net profit to mother was 3.106 billion yuan, +21.5% year on year; net profit without return to mother was 2,595 billion yuan, +29.9% year over year. The overall performance was in line with expectations, and the deduction slightly exceeded expectations. The emerging equipment business contributed rapidly to revenue growth, achieving revenue of 8.732 billion yuan, +70% year-on-year; the rail transit equipment business achieved revenue of 12.9 billion yuan, +2% year-on-year.
Gross margin rebounded (33.86%), +1.17pct year over year, mainly due to increased capacity utilization of power semiconductors and the effectiveness of procurement cost reduction measures.
Rail transit equipment is progressing steadily, and the maintenance market is taking advantage of the trend. According to the company's annual report, rail transit business revenue was stable overall. Among them, rail transit electrical equipment revenue grew 4.8%, and the traction conversion system market space and pattern were relatively stable; revenue growth rates for rail transit construction machinery, communication signal systems, and other rail transit equipment were -1.05%/0.37%/-37.11%, respectively. As the advanced repair market begins to expand significantly in '24, the company's systems and equipment revenue is expected to unleash greater elasticity.
Emerging equipment grew rapidly, and gross margin rebounded significantly and recovered. According to the company's annual report, the gross margin of emerging equipment rebounded to 28.2%, +2.5pct. The power semiconductor business highlighted superior profitability. The Zhuzhou CRRC Times Semiconductor subsidiary contributed about 1,028 billion yuan in profit, and the expansion of production in Zhuzhou and Yixing is progressing smoothly. New energy vehicle electric drive+industrial conversion is still under some pressure in the face of deteriorating pattern and downstream price pressure, waiting for the industry to clear the inflection point.
Profit forecasting and investment advice. The company's current valuation is in a low history+ with both growth and dividend attributes, and it is expected that it will break out of differences and usher in the dawn. The estimated net profit for 24-26 is 36/43/52 billion yuan, giving the company a 2024 PE valuation of 20x, corresponding to a reasonable value of RMB 50.87 per share for A shares; considering the AH share premium factor, it corresponds to a reasonable value of HK$30.52 per share for H shares, giving it a “buy” rating.
Risk warning. The risk of overcapacity in the power semiconductor industry; the risk of declining prices and profitability; the risk of falling short of expectations in the rail transit industry.