Incidents:
The company released its 2023 annual report and 2024 quarterly report. In 2023, it achieved operating income of 1,845 million yuan, +83.13% year over year; realized net profit of 182 million yuan, +42.69% year over year. It is basically at the center of previous performance forecasts and is in line with market expectations. 24Q1 achieved operating income of 274 million yuan, +0.57% year over year; realized net profit of 0.5 billion yuan, -81.88% year over year, lower than previous expectations.
Significant expansion increased the cost rate in 23 years, and short-term pressure on the company's performance accelerated market expansion and production capacity expansion in 2023. Technology, production and sales personnel increased 53%/42%/33% year on year respectively, leading to an increase in employee remuneration in 24Q1; deepening and improving the market service system, and corresponding increases in travel and exhibition expenses; newly purchased facilities and equipment were used one after another, and depreciation and amortization increased year on year; combined with factors such as increasing the development of new products, new processes, and amortization of equity incentive expenses, etc., led to a combination of factors such as 24Q1 overall gross margin of 1.8 pcts year-on-year. Management and R&D rates increased by 2.3/2.2/1.5pct year-on-year respectively, putting pressure on the company's performance in the short term.
Energy storage revenue has increased dramatically, and emerging fields continue to expand
In the field of energy storage, the company has successfully expanded high-quality customers in industries such as Ningde Era, Sunshine Power, CRRC, and China Airlines. In 2023, revenue in the energy storage temperature control sector was about 904 million yuan, an increase of 472% over the previous year; the energy storage business accounted for a sharp increase of 49% from 16% in 2022. In emerging fields such as semiconductor equipment, hydrogen energy, data centers, and new energy vehicle charging and switching, the company continues to develop various downstream customers, strengthen the rapid transformation of R&D results, and is expected to further expand its market share in various segments.
Large-scale equipment updates are expected to drive the company's CNC equipment temperature control revenue to increase the company's CNC equipment temperature control product revenue of 610 million yuan in 2023, up 5.99% year on year, gross margin of 31.15%, up 5.19 pct year on year. The State Council issued the “Action Plan to Promote Large-scale Equipment Renewal and Consumer Goods Trade-in”, which states that it will promote equipment upgrading and transformation in key industries and accelerate the promotion of energy equipment with advanced energy efficiency; with the company's superior market position and competitive advantage in the field of industrial temperature control, the revenue growth rate in the field of CNC machine tools and laser equipment is expected to increase further.
Profit Forecasts, Valuations, and Ratings
We expect the company to increase the current high cost rate level with revenue in multiple fields and increase the growth rate of the energy storage and CNC equipment business. The company's 24-26 revenue is estimated to be 26.61/34.18/4.233 billion yuan respectively, with year-on-year growth rates of 44.21%/28.45%/23.85%, respectively, and net profit to mother of 2.85/3.77/ 478 million yuan, respectively. The year-on-year growth rates are 56.54%/31.94%/26.97%, EPS is 1.69/2.24/2.84, respectively Yuan/share, 3-year CAGR is 37.97%. In view of the increase in the company's energy storage market share and continuous development in emerging fields. Referring to comparable company valuations, we gave the company 25 times PE in 2024, with a target price of 42.25 yuan, and gave it a “buy” rating.
Risk warning: industry competition intensifies; raw material prices fluctuate greatly; overseas policy risks.