Key points of investment
Incident: The company released its 2023 annual report and 2024 quarterly report. In 2023, it achieved revenue of 4.625 billion yuan, +37% year on year, net profit of 609 million yuan, +35% year on year; in 2024Q1, revenue of 1,417 million yuan, +55% year over year, and net profit to mother of 219 million yuan, +66% year over year.
New and old businesses are flourishing, and the best sales of ideal models drive the release of domain control products. In 2023, the company's lighting control system, motor control system, energy management system, vehicle electrical and electronics business achieved sales revenue of 2,366 million yuan, 794 million yuan, 431 million yuan, and 763 million yuan respectively, +36%, +28%, +247%, and +14% over the same period last year. The business of new customers such as Ideal and BMW was +338% year-on-year. The company cooperated deeply with Ideal. Supporting products include lighting control, body domain control, motor actuators, etc. Among them, car body domain control is equipped with ideal L7, L8, etc., and the good sales of related models contributed to a significant increase in the company's energy management system business revenue.
Gross margin rebounded sequentially in 2024Q1, and expense ratios continued to improve during the period due to scale effects. In 2023, the company's gross margin was 29.55%, -3.34pct year on year. The gross margin for lighting control systems, motor control systems, energy management systems, vehicle electrical appliances and electronics businesses was -1.69pct, -3.18pct, +10.44pct, and -4.77pct, respectively. With the release of domain control products, the profit level of the energy management system business increased significantly; the gross margin for 2024Q1 was 31.97%, +0.65pct year on month. In terms of period expenses, the company's expenses rate for the period 2023 was 14.03%, -3.53 pct year on year, 15.93% for the 2024Q1 period, and -1.55 pct year on year. Under the effect of scale, the company's sales expenses rate and management expenses ratio improved significantly year-on-year.
The leading position in the main lighting control business is stable, and it continues to benefit from the increase in global customer share and the expansion of the intelligent light source business. The company's lighting control products for customers such as BMW, Ford, and Renault will continue to increase this year. At the beginning of the year, the company received a project target for the next-generation LED headlight controller platform from Audi in Germany. Among them, the HD high-resolution headlight controller will be equipped with Volkswagen Group's middle and high-end models, and the standard LED headlight controller covers brands such as Skoda, SEAT, Volkswagen, Audi, Porsche, Bentley, Lamborghini, etc., and the life cycle is expected to exceed 10 years. At the same time, the company's ambient lighting products have been selected by customers such as FAW-Volkswagen, SAIC Volkswagen, Hongqi, Ideal, and Audi, and the smart light source business is expected to continue to grow at a high rate.
The product line continues to expand, and new products such as domain control and Efuse have become new growth points. The company expands new products such as body domain control, chassis domain control, glass discoloration, Efuse, next-generation lighting control technology, electric drive control, etc., optimizing the product structure to higher value products, and increasing the value of bicycles through the expansion of customer support model categories. In terms of chassis controllers and domain control, since 2023, the company has equipped the ideal L7 and L8 with body domain control, BYD looks forward to supporting chassis domain control, supporting DCC for Xiaopeng G6, and mass production of chassis controller projects for Geely related models in 2024; the participating company Keboda Intelligent Technology lays out autonomous driving areas and cockpit domains, and has obtained multiple project targets. On the Efuse side, the company has been designated for customer projects such as Geely, Ideal, and Volkswagen.
Accelerate the construction of overseas bases in Europe and North America based on global development. The company is firm in its global market development strategy, and plans to focus on expanding the global business of customers such as Toyota, Stellantis, GM, and Honda, and promoting new products such as chassis suspension controllers, chassis domain, vehicle body area, and Efuse overseas. The company accelerated the pace of overseas factory construction, and in 2023 it cooperated with the local Japanese company KAGAELECTRONICS CO. , LTD cooperated to establish the first overseas production base in Japan and officially put into operation before the end of the year. The Japanese factory uses OEM production methods to serve Japanese OEMs such as Toyota, Honda, Nissan, and Suzuki, as well as European and American new energy customers; actively plans to build plants in Europe and North America to ensure supply chain security and localized production in important customer markets.
Investment suggestions: The share of the company's main lighting control business among global customers continues to rise, and new products such as domain control and Efuse expand smoothly, and adjust the company's profit forecast. The company's net profit for 2024-2026 is estimated to be 887 million yuan, 1,134 billion yuan, and 1,391 billion yuan (the original 2024-2025 forecast was 836 million yuan and 1,072 million yuan), corresponding EPS was 2.17 yuan, 2.41 yuan, and 3.44 yuan (the original 2024-2025 forecast was 2.07 yuan and 2.65 yuan), calculated based on the closing price of April 23, 2024 The corresponding PE is 31X, 24X, and 19X, maintaining a “buy” rating.
Risk warning: the risk of downstream customer vehicle sales falling short of expectations, risk of fluctuating raw material prices, risk of new product expansion falling short of expectations, etc.