Core views

The company actively develops products and customers, and continues to grow well on the revenue side. Overseas real estate and post-cycle demand is showing a positive trend. At the same time, the removal of warehouses in the tool and other industries has basically come to an end, which is expected to benefit the company's overall demand for controller products. In the first quarter of 2024, the company's controller gross margin increased by 0.7 pct year on year, and the three period expenses (sales expenses, R&D expenses, and management expenses) increased 32.7% year on year. Compared with the 54.2% year-on-year growth rate of three fees for the full year of 2023, it has subsided. As the company continues to reduce costs and increase efficiency through supply chain optimization, R&D and design optimization, etc., strengthen cost management, control expenses, and improve production and management efficiency, the gross margin of the company's controllers is expected to increase further in the future, the cost growth rate is expected to be controlled, and profitability is expected to gradually increase.

occurrences

The company released its 2024 quarterly report. In the first quarter of 2024, the company achieved revenue of 1,982 billion yuan, an increase of 20.51% over the previous year, and realized net profit to mother of 97 million yuan, an increase of 18.06% over the previous year.

Brief review

1. Controller revenue continues to grow relatively well.

The company released its 2024 quarterly report. In the first quarter of 2024, the company achieved revenue of 1,982 million yuan, a year-on-year increase of 20.51%; realized net profit to mother of 97 million yuan, an increase of 18.06% over the previous year; and realized net profit after deduction of 82 million yuan, an increase of 12.73% over the previous year.

In the first quarter of 2024, the company's controller business segment achieved revenue of 1,962 billion yuan, a year-on-year increase of 22.3%, and the gross profit margin of the controller segment was 16.6%, an increase of 0.7 pct over the previous year, achieving net profit attributable to the parent company of 104 million yuan, an increase of 36.3% over the previous year. The company's various business segments have achieved good results in terms of new customers and new projects, obtained platform-level projects from many major customers, further increased client share, and laid the foundation for continued good growth in the future.

In the first quarter of 2024, Chengchang Technology's revenue was 1.78 million yuan, a year-on-year decrease of 50.7%. The net profit to the mother was a loss of 14.9 million yuan, and the first quarter of 2023 was a profit of 12.21 million yuan.

The growth rate of 2 and 3 fees has subsided, and profitability is expected to increase in the future.

In the first quarter of 2024, the company's three period expenses (sales expenses, R&D expenses, and management expenses) totaled 235 million yuan, an increase of 32.7% over the previous year. It was mainly due to the increase in salary expenses, travel expenses, operating expenses and overseas support expenses starting in the second quarter of 2023. However, compared with the 54.2% year-on-year growth rate of three fees for the full year of 2023, it has subsided. Looking at the breakdown, in the first quarter of 2024, the company's sales expenses were 41 million yuan, up 51.6% year on year, management expenses were 79 million yuan, up 24.9% year on year, and R&D expenses were 114 million yuan, up 32.4% year on year.

As the company continues to reduce costs and increase efficiency through supply chain optimization, R&D and design optimization, etc., strengthen cost management, control expenses, and improve production and management efficiency, the company's profitability is expected to increase in the future.

In the first quarter of 2024, the net cash flow from the company's operating activities was -149 million yuan, and the first quarter of 2023 was 69 million yuan, mainly due to payment of purchase payments and employee remuneration bonuses. As the company's customer repayments are recorded one after another and large payments are reduced, the company's operating cash flow is expected to return to normal levels in the future.

3. Profit prediction and investment advice.

The company actively develops products and customers, and revenue continues to grow well. Overseas real estate and post-cycle demand showed a positive trend. At the same time, the removal of the tool and other industries has basically ended, which is beneficial to the company's overall demand for controller products. In the future, the company's controller gross margin is expected to increase further, cost growth is expected to be controlled, profitability is expected to gradually increase, and overall operations are expected to continue to improve. We expect the company's revenue from 2024 to 2026 to be 9.71 billion yuan, 12.67 billion yuan, and 16.01 billion yuan, respectively, and net profit to mother will be 570 million yuan, 850 million yuan, and 1.12 billion yuan respectively. The corresponding PE is 18x, 12x, and 9x, respectively, maintaining a “buy” rating.

4. Risk warning. Changes in the macroeconomic environment affect consumer demand in the terminal market, and the home appliance and power tool business falls short of expectations; market competition intensifies, affecting the company's supply share in major customers, or leading to a decline in the company's gross margin; changes in trade policy, affecting the company's raw material supply and product delivery; chip shortages and price increases exceeding expectations, affecting the company's gross profit margin; large exchange rate fluctuations affect the company's gross margin and exchange profit and loss; the revenue growth rate of new businesses such as automotive electronics and energy storage falls short of expectations; the gross margin of new businesses such as automotive electronics and energy storage falls short of expectations; Efficiency improvements, supply chain optimization, and cost control fall short of expectations, etc.