Incident: On April 17, 2024, Dingtong Technology released its 2023 annual report and 2024 quarterly report. For the full year of 2023, the company achieved operating income of 683 million yuan, -18.65% year on year, and realized net profit of 67 million yuan, -60.48% year on year; in the first quarter of 2024, the company achieved operating income of 194 million yuan, +19.37% year on year, and realized net profit of 0.18 million yuan, or -45.11% year on year.
The company's operating pressure was strong in 2023. The revenue side improved significantly in 2024, and the profit side was under pressure in the short term.
In the first half of 2023, due to the global macroeconomic downturn and weak communications market, demand from end customers for the company's communication connector products fell short of expectations, and demand for shell (cage) products declined markedly, which had an impact on the company's overall performance. Since the end of the third quarter of 2023, the market situation has gradually improved, demand for communication connector products has gradually begun to pick up, and demand from direct customers has also shown a month-on-month growth trend.
2024Q1's revenue has shown clear signs of recovery. On the profit side, due to unsaturated demand capacity and uncertainty in production plans, the company faces higher actual labor costs and depreciation and amortization costs, which has led to a decline in gross margin of communication connector products. However, the company still firmly maintains close partnerships with direct customers (such as Morse, Amphenol, Tyco Electronics, etc.) and continues to expand product categories. At the same time, based on the background of the era of rapid development of AI artificial intelligence, the company actively cooperates with customers to continuously develop a series of new products such as QSFP-DD112G/OSFP-DD/OSFP, injecting new vitality into the company's communications business.
The company is actively deepening its automotive business layout, and future growth can be expected. The company continues to expand its front-end sales team in the automotive sector, and has set up marketing centers in many parts of the country, such as Changchun, Nanjing, Chengdu and Shenzhen. At present, the company has successfully covered many leading companies in the NEV industry, such as BYD, FAW, and Tongyu Automobile.
The broad customer base provides the company with a stable source of business and growth potential. In terms of products, the company is committed to developing various new energy vehicle connectors and components, including electronic control connectors, high-voltage connectors and their structural parts, hardware plastic structural parts, copper soft bars, etc. The products developed by the company in the past, mainly BYD, gradually began mass production. Sales in the new energy market reached record highs, and demand and sales increased significantly. At the same time, the company tried to expand emerging business fields and achieve diversified development, developed Morse's BMS business module horizontally, and obtained the BMSGen6 battery project. Currently, it is in the small-batch trial production stage.
Investment advice: We expect that along with the improvement in downstream demand in the company's main communications industry, and the company's automotive business customer development and new product layout, the company is expected to achieve high-quality growth from 2024 to 2026. We expect the company's revenue to reach 1,039 billion yuan, 1,537 billion yuan, and 2,182 billion yuan respectively, and net profit to mother is expected to reach 102 million yuan, 155 million yuan, and 225 million yuan respectively. We believe that the corresponding PE is 46/30/21X, respectively. At the same time as the industry is developing rapidly It is expected to grow rapidly with its technical advantages and maintain a “recommended” rating.
Risk warning: Overseas demand for the company's products fell short of expectations; sales of new energy vehicles fell short of expectations; the expansion of the company's product categories fell short of expectations.