The company released its 2023 annual report: It achieved annual revenue of 5.72 billion yuan, +7.2% year-on-year, realized net profit of 70 million yuan, +14.0% year-on-year, and realized net profit without deduction of 650 million yuan, or +14.9% year-on-year.
By product, the size and gross margin of the company's electronic products increased slightly in 2023, with annual revenue of 2.25 billion yuan, +5.0% year-on-year, gross profit margin of 37.0%, +2.7pct, 23H2 gross profit margin 39.2%, which is significantly better than 34.3% in the first half of the year. We think it mainly benefited from the decline in raw material prices. The average price of main raw materials such as PE, PVC, EVA, etc. in 2023 was 0.81/0.61/142,000 yuan/ton, respectively, -4%/-18%/-35%, compared with the same period. 100 million yuan, -14.5% year on year, gross profit margin 15.8%, -4 pct year on year; annual revenue of electric power products was 1.28 billion yuan, +22.3% year on year, gross profit margin 40.5%, +1.6 pct year on year; new energy products had annual revenue of 860 million yuan, +29.6% year on year, gross profit margin of 31.8% year on year, -2.3 pct year on year.
In terms of major subsidiaries, Shanghai Kete achieved net profit of 54 million yuan, -5.6% year on year; Wall Hong Kong Trading (parent company of Leting Zhilian) achieved net profit of 60 million yuan, -42.4% year on year; Wall New Energy achieved net profit of 68 million yuan, +16.7% year on year; and Wall Xinyuan Wind Power achieved net profit of 81 million yuan, which was basically the same as the previous year.
The 24Q1 results are expected to increase significantly. According to the company's pre-increase announcement, it is estimated that 24Q1 will achieve net profit of 177-208 million yuan, an increase of 70%-100% over the previous year, and realized net profit of 164-193 million yuan without return to mother, an increase of 70%-100% over the previous year.
The wire business is expected to benefit from the development of AI servers and intelligent driving. High-speed communication cables produced by Leting Smart Link are passive DAC copper cables. In terms of short-range signal transmission, they have the advantages of low power consumption, high cost performance, and high speed. They are widely used in data signal transmission in data centers, servers, switches/industrial routers, etc. Some specification products can be used in AI servers. The main customers include Amphenol, Hollis, Morse, Tyco, etc., and 400G and 800G high-speed communication lines have all achieved stable mass production. The single-channel 224G high-speed communication line is still being tested with major customers such as Amphenol. In terms of automotive cables, the company has completed the development of automotive 25G Ethernet cables, which can be widely used for data transmission in automotive lidars and backbone network systems. It has characteristics such as stable signal transmission rate, high speed, waterproof, and high temperature resistance.
Maintain a “Highly Recommended” investment rating. Considering that the company's first-quarter results exceeded expectations, we raised our profit forecast. We expect net profit to be 8.5/9.9/1.16 billion yuan in 2024-26, corresponding to a price-earnings ratio of 17.5/15.0/12.8 times, maintaining a “highly recommended” investment rating.
Risk warning: macroeconomic environment and policy risks, industry competition risk, raw material price fluctuation risk, company operating risk, demand for new energy sources falling short of expectations or changes in technology routes, etc.