Key topics for investing in subsidiary qualifications:
Incident: On April 19, 2024, Tongling Co., Ltd. released its 2023 annual report and 2024 quarterly report. In 2023, the company achieved operating income of 1.54 billion yuan, up 23.4% year on year; net profit to mother was 165 million yuan, up 42.7% year on year, gross profit margin of 22.9% year on year, up 7.18 pct year on year; 23Q4 achieved revenue of 388 million yuan, up 46.6% year on year, net profit margin of 0.2 billion yuan, -7.1% year on year; gross profit margin of 24%, +6.68 pct year on year; first quarter of 2024 The company achieved revenue of 409 million yuan, up 24.2% year on year, net profit of 36 million yuan, -3.8% year on year, gross profit margin 18.9%, -5.11 pct month on month, and -2.65 pct year on year.
Photovoltaic installations are booming, driving a high increase in junction box shipments: In 2023, it benefited from a rapid decline in PV module prices, and demand for PV installations exceeded expectations. According to the National Energy Administration, China added 216.88 GW of new PV installations in 23, a sharp increase of 148% over the previous year, driving the company's high sales volume of junction boxes. In 23, the company sold a total of 80.2495 million sets of junction boxes, an increase of 37% over the previous year. The leading position continued to consolidate.
Depreciation dragged down 23Q4 performance. 24Q1 was affected by costs and expenses: 23Q4's gross profit margin in a single quarter was 24%, the highest for the whole year. Profits were mainly due to financial difficulties caused by component customer Suntech, and commercial acceptance bills were heavily overdue, so the company calculated more credit and asset impairment (total 57.45 million yuan); in 24 years, due to high increases in raw copper prices, gross margin was under pressure, and the 24Q1 fee rate rose to 8.56%, affecting the company's profitability.
Rapid release of connected wiring harnesses, and the new auto parts business can be expected in the future: the company's connected wiring harness business mainly drives high-end markets in Europe and the US, and is a non-standard product, with a high gross margin. It has grown into a stable profit growth point for the company in 23 years (achieving revenue of 209 million yuan, gross profit margin of 33.68%). The company is expected to fully benefit from the increase in US PV demand in anticipation of interest rate cuts; the company acquired Jiangzhou Automobile to enter the auto parts business in 24, while investing 100 million yuan to build new energy parts projects with an annual output of 6.5 million sets of automotive roofs, fenders, wiring harnesses, etc. Expected to achieve sales revenue after delivery At 290 million yuan, the auto zero injection molding process can be developed collaboratively with the company's main business, which is expected to become a new growth point for the company's performance.
Profit forecast and valuation: Considering the continuous rise in raw material copper prices in 24 and the decline in junction box prices under downstream pressure, it is estimated that the company will ship 1.18/13,300 sets of junction boxes in 24-26, with net profit of 2.24/3.46/ 492 million yuan respectively (original value of 311/434 million yuan in 24-25). The current stock price corresponds to 24-26 PE 16.9/10.9/7.7 times that of PE16.9/10.9/7.7 times in 24-26. The company's main junction box business continues to gain strength, increasing profits At the same time, it increased the company's market share, maintained 20 times PE in 2024, corresponding to a target price of 37.25 yuan/share, and maintained a “buy” rating.
Risk warning: Global PV installations fall short of expectations, industrial chain prices fluctuate greatly, production capacity investment falls short of expectations, and industry competition exacerbates risks