Incidents:
Dunan Environment released its 2023 annual report and 2024 quarterly report. The 2023 revenue was 11.38 billion yuan (+11.5% YoY), net profit to mother was 740 million yuan (-11.5% YoY); Q4 revenue in 2023 was 2.94 billion yuan (+1.4% YoY), and net profit to mother was 200 million yuan (+43.1% YoY). In 2024, Q1 revenue was 2.63 billion yuan (+7.3% YoY), and net profit attributable to mother was 210 million yuan (+28.9% YoY).
Comment:
Refrigeration equipment and accessories are developing steadily, and automotive thermal management is growing at a remarkable rate. In 2023, refrigeration equipment and accessories achieved operating revenue of 1.65 billion yuan (+10.5% YoY) and 8.46 billion yuan (YoY +8.7%), and the gross margin of refrigeration equipment was 24.7%, an increase of 0.7 pct over the previous year; the gross margin of refrigeration accessories was 19.4%, an increase of 2.6 pct over the previous year; the company maintained efficient R&D investment, and the competitiveness of stop valves, four-way valves and electronic expansion valves was strong, and continued to promote the development and promotion of copper removal products. Automotive thermal management achieved operating revenue of 470 million yuan (+136.5% year-on-year), benefiting from rapid growth in NEV sales. The company has become a partner of many leading car companies and suppliers. Large-caliber electronic expansion valve technology is continuously upgraded and improved, and the market share is expected to increase.
Net margins increased slightly in Q4 2023 and Q1 2024. In 2023, the company's gross margin in Q4 was 18.98%, up 2.30pct year on year; the net margin was 6.68%, up 1.88pct year on year; the increase in gross margin was related to product structure upgrades. The company's gross margin in Q1 in 2024 was 17.53%, a year-on-year decrease of 1.91 pct; the net profit margin was 7.92%, an increase of 1.38 pct; the decline in gross margin was related to increased competition in the industry and rising prices of bulk raw materials. The net interest rate was still increasing, and the company's management efficiency continued to improve.
Investment in smart factories has increased, and talent management mechanisms have been improved. The company has increased investment in smart factories integrating human-robot collaboration, production, operation and control, and has successfully launched an overseas information system. Internal talent training promotes phased construction, and the training mechanism is gradually improved.
Profit forecast: Taking into account the competitiveness and innovation of the company's products, we expect the company's revenue in 2024-2026 to be 133.6/155.7 billion yuan, up 17.4%/16.6%/15.0% year on year; net profit to mother will be 10.1/12.6/1.53 billion yuan, up 36.4%/25.3%/21.5% year on year. First coverage, giving a “buy” rating.
Risk warning: raw materials rise, overseas demand falls, performance forecasts and valuations fall short of expectations