2024Q1 profit increased, optimistic about structural adjustment and improved profit+zero zero growth. Maintaining the “buy” rating, the company achieved revenue of 11.382 billion yuan (+11.5%), net profit to mother of 738 million yuan (-11.5%), net profit after deducting non-return to mother of 821 million yuan (+78.08%), and both revenue and profit reached record highs. Looking at a single quarter, 2023Q4 achieved revenue of 2,937 million yuan (+1.43%), net profit of 198 million yuan (+43.11%), net profit of non-return to mother of 197 million yuan (+126.75%), 2024Q1 achieved revenue of 2,626 million yuan (+7.31%), net profit to mother of 208 million yuan (+28.88%), net profit of non-return to mother 200 million yuan (+13.94%). We have continued to be optimistic about the steady increase in profits of the refrigeration industry under product structure optimization and internal cost reduction and efficiency, and the release of auto parts business orders. We raised our profit forecast for 2024-2025 and added a profit forecast for 2026. The net profit for 2024-2026 is 9.39/11.40/1,361 billion yuan (the original value for 2024-2025 was 889/1,031 billion yuan). The corresponding EPS is 0.88/1.07/1.28 yuan, and the corresponding PE price is 12.5/10.3/ 8.6 times
The auto zero business continued to grow rapidly in 2023, and trading orders related to Gree were gradually fulfilled. The refrigeration parts/ refrigeration equipment/ automobile thermal management business achieved revenue of 84.56/16.46/ 473 million yuan in 2023, respectively, +8.74%/+10.53%/+136.54% year-on-year respectively, and 2023H2 +7.76%/+20.47%/+128.64% year-on-year respectively. Furthermore, in 2023, the company's subsidiary Dunan Thermal Technology achieved revenue of 1,072 billion yuan (+14.8%) and a profit margin of 14.2% (+2.7pct). It is expected that the heat exchanger business revenue will maintain good growth in 2023 and increase profit margins driven by businesses such as Microchannel. In the subregion, domestic and foreign revenue in 2023 were 94.34/1.949 billion yuan respectively, +14.65%/-1.63% year over year, and 2023H2 +12.32%/-4.43% year over year respectively. In terms of customers, the company generated 2,413 billion yuan (+46%) in sales to Gree and its subsidiaries in 2023, and the estimated sales amount in 2024 was 2.9 billion yuan (+20%). Looking ahead, the gradual fulfillment of high production schedules+Gree orders from downstream customers is expected to support steady growth in the cold distribution business throughout the year. The auto parts business is expected to gradually increase revenue scale due to abundant in-hand orders, and the increase in the share of long-term high-profit businesses will drive overall profit to continue to increase. 2024Q1 gross margin was disrupted by annual decline in downstream customers and changes in sales structure. Expense rates continued to improve 2023 gross profit margin of 19.19% (+2.19pct), 2024Q1 gross profit margin 17.53% (-1.97pct), and the year-on-year decline in 2024Q1 gross margin or decline in gross margin mainly due to annual decline in downstream customers of refrigeration accessories and a decrease in the revenue share of high-margin refrigeration equipment. 2023Q4 On the cost side, in 2023, the company's sales/management/R&D/finance expense ratios were +0.36/+0.16/-0.03/-0.67pct year on year, 2023Q4 was +0.34/-0.18/-1.83 pct year on year, and 2024Q1 was +0.07/+0.3/-0.35/ -0.74pct year on year, respectively. The financial expense ratio continued to improve. Under the combined influence of 2023 net interest rate 6.48% (-1.79pct), net profit margin 7.21% (+2.67pct); looking at 2023Q4 net profit margin 6.74% (+1.98pct), net non-net profit margin 6.72% (+3.71pct), 2024Q1 net profit margin 7.94% (+1.27pct), net profit margin 7.6% (+0.42pct) in a single quarter.
Risk warning: Auto parts business expansion falls short of expectations; industry competition intensifies; raw material prices continue to rise, etc.