Incident: The company released its 2023 annual report and 2024 quarterly report. In 2023, it achieved operating income of 1,540 million yuan, a year-on-year increase of 23.35%, and realized net profit of 165 million yuan, an increase of 42.59% over the previous year, and a cash dividend of 1.68 yuan (tax included) for every 10 shares; 2024Q1 achieved operating income of 409 million yuan, an increase of 24.20% year on year, and realized net profit of 36 million yuan, a year-on-year increase of 80.74%.
The sales volume of junction boxes has increased steadily, and the revenue scale of connected wiring products has grown rapidly.
With the rapid growth in the scale of PV installations, the sales scale of the company's core products has increased markedly. In 2023, the company's junction box sales increased 37.33% year over year to 80,2495 million sets, but the company's market share was under some pressure. According to the company's estimates, the market share of junction boxes decreased by 2.24 pcts to 11.73% year on year; in 2023, the company's diode junction box/chip junction box revenue was +24.75%/-12.07% YoY to 10.00/245 million yuan, gross margin +6.36/+5.74 pcts to 20.00%/23.97% year-on-year. In addition, the company's connected wiring products showed a strong growth trend. In 2023, revenue increased 117.59% year on year to 209 million yuan, and gross margin increased 11.60 pcts year on year to 33.68%, which has become a new performance growth point for the company.
2024Q1's revenue scale maintained a steady growth trend, but net profit to mother declined slightly year on year. We believe the core reason is that the company's profitability declined in 2024Q1 due to increased competition and seasonal fluctuations in the shipping product structure, and the gross margin of the 2024Q1 company decreased by 2.65 pcts to 18.90% year on year.
Continuing to increase investment in R&D, the layout of the auto parts industry is expected to develop into a new growth curve for the company.
The company attaches great importance to independent research and development and continuous upgrading of products. In 2023, R&D investment increased by 41.77% year-on-year to 74 million yuan, accounting for 0.62 pct to 4.81% of revenue. Furthermore, as of April 2024, the company has completed the acquisition of a controlling interest in Jiangzhou Automobile Co., Ltd. and is actively exploring the second track product line. It is expected to complete the layout of the auto parts industry and contribute to profit and cash flow in the future.
Maintaining a “buy” rating: Affected by factors such as increased competition in the industry, the company's junction box market share is under certain pressure. As a matter of prudence, we lowered our profit forecast without considering the revenue and profits contributed by auto parts. The company is expected to achieve net profit of 2.60/3.02 billion yuan (33% down/40% down/increase) in 24-26, and the current stock price corresponds to 15 times PE in 24 years. Although the company's market share of junction boxes is under phased pressure, it is still in a leading position in the industry. The scale of future shipments will increase steadily as market demand increases; in addition, the rapid increase in the company's shipments of connected wiring harness products and the development after the layout of the auto parts industry is expected to contribute new performance increases to the company and maintain a “buy” rating.
Risk warning: The scale of new PV installations fell short of expectations; the price drop of junction box products exceeded expectations due to increased competition in the industry; chip junction box sales fell short of expectations.