Incident: The company released its 2023 annual report. In 2023, the company achieved operating income of 692 million yuan, a year-on-year increase of 14.82%, a year-on-year decrease of 8.78%, and realized net profit withholding of 128 million yuan, a year-on-year decrease of 8.84%; in the fourth quarter of 2023, the company achieved operating income of 240 million yuan, an increase of 16.86% year on year; realized net profit attributable to mother of 31.45 million yuan, a year-on-year decrease of 30.85%; realized net profit without return to mother of 29.4137 million yuan, year on year The decrease of 34.20% was slightly lower than market expectations.
Benefiting from rapid business expansion, 2023Q4 revenue surged 46% month-on-month.
(1) Growth analysis: 2023Q4's revenue increased 16.86% year on year, up 46.00% month on month; net profit to mother decreased by 30.85% year on year and increased 6.44% month on month, mainly due to cost growth due to the layout of future sustainable development: ① In order to increase R&D investment for new products, the company's R&D expenses increased 46.07% year on year; ② in order to increase market development efforts, sales expenses increased 32.09% year on year; ③ the company's Jiashan Park opened and put into operation, investment in labor and depreciation increased 51.80% year on year; due to ④ Interest income and exchange income from the company's fund-raising accounts decreased, and financial expenses increased 38.42% year-on-year.
(2) Profitability analysis: In 2023, the company's gross sales margin was 45.14%, up 0.9 pct year on year; the net sales margin was 19.53%, down 4.82pct year on year; the sales/management/finance expense ratios were 8.27%, 5.74%, and -1.48%, respectively, up 1.08pct, 1.40pct and 1.27pct year on year, respectively.
(3) Analysis of operating capacity and operating cash flow: In 2023, the company's inventory turnover days was 172.69 days, a year-on-year decrease of 5.54 days; the number of accounts receivable turnover days was 111.54 days, an increase of 29.83 days over the previous year. The company's net operating cash flow was 70.1 million yuan, a year-on-year decrease of 18.03%, mainly due to an increase in wages, salaries and benefits paid to employees.
(4) Continuous R&D innovation: The company continued to increase R&D investment. In 2023, the company's R&D expenses were 82.2414 million yuan, an increase of 46.07% over the previous year, and R&D expenses accounted for 11.89% of revenue, an increase of 2.54 pcts over the previous year; by the end of 2023, the company applied for 31 new invention patents, obtained 3 new utility model patents, obtained 8 design patents, and obtained 7 software copyrights.
The automotive electronics business took a three-pronged approach to receive new orders in bulk.
(1) In terms of automotive comfort system sensors, the company continues to do a good job in product delivery while increasing market development efforts. It has made breakthroughs in new project expansion, new customer acquisition, and order conversion for original customers, and has entered the supply chain systems of many well-known automobile groups.
(2) In terms of high temperature gas sensors, the company actively explores domestic and foreign markets and expands production capacity to achieve domestic replacement. The company has sold more than one million front-mounted engine emission sensors; all testing and verification work for the first engine nitrogen and oxygen sensor front-assembly project has been completed and will be put on the market in batches in 2024.
(3) In terms of power battery thermal loss monitoring sensors, the company's lithium battery thermal uncontrolled gas production and battery charging/discharging process online detection solutions based on laser Raman technology have been approved and ordered by mainstream battery companies and research institutes; power battery thermal loss monitoring sensors have been shortlisted by car companies and leading battery companies, and the project will be mass-produced one after another.
Expand the healthcare business and strengthen the air quality business.
(1) The company further enriches the medical health sensor product line around the respiratory system and gradually forms medical health gas sensor solutions covering the fields of ventilators, oxygen concentrators, anaesthesia machines, monitors, diffuse pulmonary function instruments, cardiopulmonary analyzers, and plateau dispersive oxygen concentration monitoring. At the same time, the company is increasing investment in R&D and certification of respiratory related medical devices to expand the layout to related medical devices. In 2023, the sales revenue of the company's healthcare business, which mainly focuses on ultrasonic oxygen sensors, increased 68.51% year-on-year.
(2) In 2023, the sales revenue of the company's HVAC business, which mainly focuses on civilian air quality gas sensors, fell 25.90% year on year. The company continues to consolidate the customer advantages of dust sensors, CO2 sensors, formaldehyde, and VOC sensors in the smart home field, and improve the installation rate of environmental appliances and cleaning appliances; further raise the unit value and industry competition threshold by promoting modules and controller products that integrate air quality sensors; and obtain new controller business orders from many leading domestic and foreign home appliance companies through ODM cooperation.
Accelerate the construction of new production capacity and accelerate the international layout.
(1) The company has accelerated the construction and commissioning of the Jiashan Industrial Park. The industrial park was opened and put into operation in May 2023 and is currently in the phase of climbing capacity. The commissioning of the Jiashan Industrial Park has further raised the production capacity level of the company's ultrasonic gas meters, automobile comfort system sensors and other products to ensure a stable supply of products.
(2) The company will invest in the construction of overseas production bases through the newly established Hungarian Quartet to provide localized production and supply of gas sensors to the company's European customer base. The construction of the Sifang production base in Hungary is conducive to improving the company's response speed to European customer needs, improving international marketing channels, seizing opportunities in overseas markets, promoting the continuous and rapid development of overseas business, and accelerating the international layout.
Maintain an “Overweight” rating. Considering factors such as the company's Jiashan Industrial Park still climbing in production capacity and slowing new downstream demand in the civilian air quality sector, we lowered the company's profit forecast. We expect the company's net profit to be 1.87, 2.43, and 302 million yuan (2024-2025 prior values were 2.21 million yuan and 284 million yuan, respectively), up 41%, 30%, and 24% year on year, respectively; according to the stock price on April 18, 2024, the corresponding PE is 18.7, 14.4, and 11.5 times, respectively, maintaining the “increase” rating.
Risk warning: risk of new business development falling short of expectations; risk of exchange rate fluctuations; risk of increased market competition; risk of fluctuations in raw material prices.