Incident: The company released its 2023 annual report and achieved revenue of 6.96 billion yuan in 2023, an increase of 3.9% year on year; net profit to mother was 450 million yuan, up 13.8% year on year. Looking at the Q4 single quarter, revenue was 1.63 billion yuan, down 19.6% year on year and 18.2% month on month; net profit to mother was 100 million yuan, down 11.1% year on year and 28.1% month on month.

Forklifts and intelligent logistics systems are two-wheel drive, and revenue is growing steadily; cost control is strengthened, exchange rate influence is compounded, and gross margin is increased. In 2023, the company's forklift segment revenue increased 5.1% year on year, intelligent logistics system revenue increased 2.2% year on year, and total revenue grew steadily. The company's comprehensive gross margin in 2023 was 22.2%, an increase of 2.0 percentage points over the previous year, mainly due to factors such as enhanced cost control capabilities, exchange rate changes, and low raw material prices. The company's comprehensive gross margin in a single quarter in Q4 was 25.5%, an increase of 3.4 percentage points over the previous year, and an increase of 6.1 percentage points over the previous quarter. The increase in gross margin in Q4 was mainly due to an increase in the share of the forklift business.

Market development efforts increased, exchange earnings decreased year-on-year, the rate of expenses increased during the period, and the net interest rate increased slightly.

The company's expense ratio for the 2023 period was 14.3%, up 2.0 percentage points year on year. Among them, the financial and sales expenses ratio increased 1.0 and 0.9 percentage points year on year, respectively; the Q4 single quarter was 17.6%, up 3.0 percentage points year on year and 5.9 percentage points month on month, mainly due to the 3.5 percentage point increase in sales expenses rate year on year and 4.3 percentage points month on month. In 2023, the company's net interest rate was 6.6%, up 0.9 percentage points year on year. The increase in net interest rate was mainly due to an increase in gross margin; the Q4 single quarter was 6.5%, up 1.5 percentage points year on year, down 0.3 percentage points from month to month. The decline in net interest rate was mainly due to an increase in the cost rate during the period.

The “big truck strategy” is combined with overseas exports, and the company's forklift sector has great potential for growth. Taking advantage of lithium electrification in the industry, the company established a large truck strategy in the forklift sector, focusing on expanding large-scale lithium-electric forklifts. Sales increased by more than 60% year-on-year in 2023. 1) Production capacity side: In March 2023, the company issued an announcement to build a new large-scale lithium-electric forklift with a production capacity of 30,000 units, with an output value of 3 billion yuan. It will be completed and put into operation within 2 years. Currently, the company's large truck product map is constantly being improved, and product competitiveness is constantly increasing. 2) Market side: The company's forklifts are mainly in overseas markets, accounting for more than 70% of exports. The main markets are Europe and America. In overseas markets, the company's car brand is strong. In the past two years, it has focused on expanding large truck dealers, and order demand will gradually be released.

Profit forecasting and investment advice. The company's net profit for 2024-2026 is estimated to be 550 million yuan, 6.6 million yuan, and 780 million yuan, respectively. The compound net profit growth rate for the next three years is 19%, maintaining a “buy” rating.

Risk warning: Overseas market expansion or falling short of expectations, risk of macroeconomic fluctuations, risk of exchange rate fluctuations.