On the afternoon of April 21, the company released its 2023 annual report and 2024 quarterly report. In 2023, it achieved revenue, net profit after deducting net profit of $1,827 million, $147 million, and $115 million, respectively, +59.11%, +94.28%, and +71.91% year-on-year; gross sales margin 17.79%, -1.13pct; net sales margin 8.14%, year-on-year +1.86pct. The first quarter of 2024 achieved revenue, net profit to mother, net profit after deducting net profit of 566 million, 53 million, and 51 million, respectively, of +66.78%, +30.18%, and +57.80%; gross sales margin of 18.59%, -2.26pct year on year; net sales margin of 9.39%, -2.73 pct year on year. The performance was in line with expectations, and the company's first equity incentive target was achieved as scheduled in 2023.
Revenue and profit increased significantly in the fourth quarter of 2023. In the fourth quarter of 2023, the company achieved revenue of 640 million, 50 million, and 30 million dollars respectively; +87.69%, +486.50%, and +719.74% year-on-year, respectively, and +41.55%, +97.92%, and +19.60%, respectively. Gross sales margin 17.20%, -1.25pct year over year, +0.46pct month-on-month. Net sales margin 7.51%, +5.84pct yoy, +1.74pct month-on-month.
Profitability continued to improve in the first quarter of 2024. In the first quarter of 2024, the company's gross sales margin was 18.59%, +1.39pct month-on-month; net sales margin was 9.39%, +1.88pct month-on-month. The increase in profitability is mainly due to an increase in scale. As of the first quarter of 2024, the company's ongoing projects declined month-on-month. Currently, the company has passed the peak of capital expenditure. It is expected that the scissor gap between the company's revenue and depreciation will continue to increase in subsequent years, thereby increasing the company's profits. Expense management is continuously optimized. The company's sales expense ratio, management expense ratio, R&D expense ratio, and financial expense ratio were 1.06%, 3.00%, and 1.24%, respectively; -0.1 pct, -0.8 pct, +3.4pct, and +0.1 pct, respectively; among them, the change in R&D expense ratio was mainly due to the increase in the absolute value of the company's R&D investment; the change in the financial cost ratio was mainly due to the increase in financial expenses due to increased borrowing; the cost rate for the period was 8.66%, -2.0pct year on year, and the ability to control expenses was improved.
Automobile engine exhaust gas recirculation (EGR) system: benefiting from the launch of the T4 phase of non-road construction machinery, hybrid vehicle sales repeatedly reaching record highs, driving the hybrid EGR system product market, and a new market space for natural gas heavy truck jet rail assemblies. Throughout 2023, EGR component production and sales volume reached 2.98,000 units and 2.365 million units respectively, +56.7% and +44.2%; production and sales of natural gas injection system components reached 74,000 units and 74,000 units, respectively, compared with +15.565% +, compared with +15.56,4%. 4826.7%
New energy vehicle motor cores: Focus on large-size, high-density mid-range and high-end iron core products. Mainstream technology for NEV motor cores (including riveting and stacking processing technology, laser welding technology, adhesive technology, etc.) is now stocked to enable key indicators such as performance, energy efficiency, and stability of NEV drive motors. In 2023, the production volume and sales volume of NEV motor components reached 1.461 million units and 1.394 million units respectively, +60.0% and +61.3% year-on-year; sales revenue was 705 million yuan. In terms of customer expansion, on the premise of ensuring a steady rise in the business of the two major customers of a foreign electric vehicle and energy company and United Auto Electronics, it also successfully developed a series of direct supply customers such as Star Drive, Jinkang Power, Fudi Power, and Bosch in 2023, and indirectly supplied to Geely, Cyrus, BYD, Changan, Ideal, Xiaomi, NIO, SAIC, Chery, and Beam Auto in the market, covering many best-selling models in the market, Model 3, Model Y, and Changan Deep Blue Vita, Geely Galaxy, Emgrand, Lynk & Co 06, 07, 08, ask M7, M9, BYD Equation Leopard, Ideal MEGA, NIO ET5, Xiaomi SU7, SAIC Zhiji, Roewe, Chery, etc.
Precision parts: Focus on precision stamping and injection molding products for auto parts, which are mainly used in the fields of new energy vehicles and fuel vehicles, accounting for about 60% and 40% of the company's sales, respectively. In 2023, the production and sales volume of precision parts reached 756.81 million pieces and 775.6.14 million pieces respectively, +5.5% and +10.1% year-on-year; among them, the production and sales volume of precision parts for new energy vehicles were 239.221 million units and 229.221 million pieces, respectively; sales revenue was 96 million yuan. In this business segment, products in the field of braking systems and power motor motors have successfully developed many new projects and new customers in 2023, which are expected to bring major performance growth benefits in the next 2-3 years; NEV copper row series products are a performance growth flashpoint for 2023 and the next 2-3 years; and new energy electric drive/electronic control system products are business growth points in 2024. On the customer side, it is mainly supplied to leading Tier 1 companies at home and abroad and leading domestic new energy companies, including European, American and joint venture customers, Bosch, United Auto Electronics, Brose, Donghai Chemical, Hitachi, Alps, Joyson Electronics, NIO, CRRC, Jinkang Power, etc. Among them, the company's products also directly support the transformation of two leading domestic mobile phones into high-quality customers in the automotive sector.
Aerospace precision manufacturing: In terms of products, it is mainly engaged in the manufacture and development of aerospace products, design, processing and parts of precision mold tooling, etc., including but not limited to precision parts and components for large-scale military drone structural parts, small military drone structural parts, satellite solar wing hinges, satellite solar wing compression release mechanisms, satellite solar wing driving mechanisms, satellite attitude control mechanisms, air molecular pumps and blades.
On the customer side, they mainly include the Mechanical Manufacturing Process Research Institute of the Chinese Academy of Engineering Physics, Beijing Xingtong Haoyu Technology Development Co., Ltd., Beijing Satellite Manufacturing Co., Ltd., and Galaxy Aerospace (Beijing) Network Technology Co., Ltd.
Investment advice: The company is a leading domestic NEV motor core company, and is also a leading EGR enterprise. It has an excellent customer structure and is full of new business. With the gradual stabilization of construction and depreciation, the company's profitability is gradually optimized. We expect profits of 2.28, 3.04, and 365 million yuan in 2024, 2025, and 2026, respectively, corresponding to 16.8, 12.6, and 10.5 XPE, which is highly recommended!
Risk warning: 1) Downstream demand falls short of expectations; 2) Price war transmission is stronger than expected.