Incident: On April 16, Shunluo Electronics released its report for the first quarter of 2024. In Q1 2024, the company achieved revenue of 1,259 billion yuan, an increase of 22.86% year on year; realized net profit of 170 million yuan, an increase of 111.26% year on year; realized net profit after deduction of 158 million yuan, an increase of 156.73% year on year.
Revenue in January reached a record high, profit levels remained high, and R&D investment continued to increase. 1) Revenue growth rate: Although 24Q1 is a traditional low season for consumer electronics, the company's revenue in a single quarter continued the trend since the second half of 23, and maintained a high year-on-year growth rate of more than 20% for the third consecutive quarter. Among them, monthly revenue in January reached a record high. In February, due to the Spring Festival effect, growth resumed in March. 2) Profitability: The company's 24Q1 gross profit reached 465 million yuan, up 41.05% year on year, and the gross profit growth rate significantly exceeded the revenue growth rate; 24Q1 gross margin was 36.95%, which was basically the same month on month, up 4.77pct year on year; 24Q1 net margin was 15.65%, up 1.59 pct month on month, up 5.84 pct year on year. The year-on-year increase in the company's gross margin was mainly due to the smooth progress of business in precision electronic components and new fields, increased market orders, continued increase in capacity utilization, and improved labor efficiency. 3) R&D investment: 24Q1's R&D expenses were about 107 million yuan, an increase of 19.92% over the previous year, and the R&D cost rate was about 8.53%. The company attaches great importance to basic research and development, research in key application areas, and new product development and batch application, and R&D investment continues to increase.
The recovery in the smartphone boom is compounded by domestic substitution, driving the steady growth of the company's traditional business. 1) 24Q1's revenue from signal processing products was 537 million yuan, up 27.87% year on year, and revenue from power management products was 410 million yuan, a slight decrease of 0.07% year on year. Signal and power products account for about 75.2% of total revenue in 24Q1. It is the company's traditional main business, mainly used in consumer electronics fields such as smartphones. The product forms are mainly laminated signal inductors, wire-wound power inductors, filters, transformers, etc. In the field of chip inductors, the company is one of the top three in the world and the number one leader in China. 2) According to data released by IDC on April 15, global smartphone shipments in 24Q1 were 289 million units (YoY +7.8%), growing for the third consecutive quarter, and the smartphone industry continued to recover. In terms of market share, Samsung/Apple shipments fell 0.7%/9.6% year on year in 24Q1, while Xiaomi/ Audio increased 33.8%/84.9% year on year, further increasing the market share of domestic mobile phone brands. 3) The company's customers cover mainstream domestic mobile phone brands, ODM manufacturers, and mainstream consumer electronics brands at home and abroad. As the market share of domestic mobile phone brands picks up and demand for localized replacement of precision inductors continues to penetrate, and the company's integrated inductors, high-end new products such as LTCC and small-size precision laminated inductors such as 008004 are put into mass production (the company's ultra-small integrated power inductors have been introduced into the Qualcomm Snapdragon 8Gen3 platform), we believe that the company's traditional signal and power supply business is expected to maintain a steady growth rate of about 20%.
New businesses such as automotive electronics and photovoltaic energy storage are growing rapidly, and major customers continue to break through. In terms of new business, the company has strategically laid out emerging industries such as automotive electronics, photovoltaics, energy storage, data centers, Internet of Things, module modules, etc., and has been widely recognized by global benchmark companies in various industries, and major customers continue to break through. 24Q1's revenue in the automotive electronics and energy storage sector was 190 million yuan, up 93.42% year on year, and revenue from ceramics, PCB and other businesses was 122 million yuan, up 26.82% year on year. 1) In the field of automotive electronics, the company has been operating since 2012. Currently, it can provide various types of transformers, magnetic rings, precision inductors, and automotive ceramic parts, covering automotive subsystems such as automotive battery management, vehicle charging, vehicle networking, headlight control, body control, thermal management, intelligent driving, and smart cockpits. Customers include Tier 1 and BYD at home and abroad, such as Bosch, Valeo, and Anbofu. As electrification and intelligence continue to penetrate, the field of automotive electronics will provide a broad space for the company's long-term growth. 2) In the field of photovoltaics and energy storage, the company provides products such as micro inverters, shutters/optimizers+string inverters, power components used in energy storage BMS, ceramic parts, etc., and has now successfully developed special new high-power components, entered the supply chain of many leading energy storage companies, and achieved batch delivery. 3) Data center/Internet of Things/industrial/module modules and others: In the data center/Netcom field, the company provides various types of laminated inductors, wire-wound power inductors, transformers and other products used in server/switches/storage systems; in the Internet of Things/industrial field, the company's products cover all kinds of household appliances, medical/health, security, drones, printers, etc.; in terms of fine ceramic products, the company's PA module has been recognized by important customer groups at home and abroad. The share of products will continue to increase. 4) Starting from the second half of 2023, the company's automotive electronics capacity utilization rate continued to be at a healthy level, and product sales continued to improve. We believe that the company's new business segments, represented by automotive electronics and photovoltaic energy storage, are expected to maintain a higher long-term growth rate than traditional businesses in the future and create broad room for growth for the company.
Investment suggestions: Considering the cyclicality of the consumer electronics sector such as downstream mobile phones and the growth of the company's new business, we adjusted the company's 2024-2026 revenue forecast to 6.118 billion yuan/7.392 billion yuan/8.795 billion yuan, and adjusted the company's net profit forecast to 887 million yuan/1,034 billion yuan/1,275 billion yuan. Based on the closing price on April 17, corresponding to 2024-2026 forward PE was 23.21 times/19.67 times/15.96 times, respectively, to maintain the “buy” “Enter” rating.
Risk warning: risk of price fluctuations in upstream raw materials; risk that demand in downstream consumer electronics and other application fields falls short of expectations; competitive patterns in the passive components industry exacerbate risks; the company's new business development progress falls short of expectations