Incident: The company released its 2023 annual report. In 2023, the company achieved revenue of 3,077 billion yuan, +6.1% year-on-year, and net profit to mother of 317 million yuan, +22.4% year-on-year.

Profitability is growing steadily, and R&D investment continues to rise. The company's gross profit margin and net profit margin reached 29.81% and 11.74% respectively in 2023, up 1.31 pct and 1.12 pct year-on-year respectively from 2022. The 23Q4 company achieved operating income of 830 million yuan, +18.03% year on year, and realized net profit of 65 million yuan to mother, +42.63% year over year. In terms of expenses, the company's annual R&D expenses in 2023 reached 147 million yuan, +10.57% year on year, management expenses reached 272 million yuan, +9.14% year on year, and sales expenses reached 857.86 million yuan, +9.89% year over year. Furthermore, due to net exchange profit and loss of 85.77 million yuan over the same period last year, the company's financial expenses increased by 62.481 million yuan over the same period last year, which affected the company's net profit performance to a certain extent.

The home appliance business is progressing steadily, and the NEV zero business has performed well. By industry: (1) Air conditioning motors and components: The company mass-produced brushless motors and electric air conditioning compressor motors and components for air conditioners, and achieved revenue of 763 million yuan in 2023, +0.08% year over year, gross margin of 24.67%, up 4.55 pcts year on year. (2) Washing machine pumps and components: Achieved revenue of 478 million yuan in '23, +4.92% year on year, gross profit margin 25.37%, up 2.16 pct year on year.

(3) Refrigerator motors and components: Achieved revenue of 268 million yuan in 2023, up 7.01% year on year, gross profit margin of 32.67%, +2.70 pct year on year. (4) Small household appliance motors and components: In 2023, the company vigorously promoted the application and promotion of modular products among small home appliance customers, achieving revenue of 296 million yuan, +25.35% over the same period last year, and a gross margin of 25.97%. (5) Industrial control motors and components: In 2023, around the “multi-application field” strategy, the company launched new products such as brushless motors, hollow cup motors, linear transmission mechanisms and high-efficiency industrial water pumps in the industrial control field, achieving revenue of 338 million yuan, -2.60% year over year, gross margin of 39.88%, up 4.81 pct year on year. (6) Medical and sports health motors and components: As motors for medical devices returned to normal demand, the business entered a stable state. Revenue of 234 million yuan was achieved in 23 years, -12.08% year-on-year, and gross margin was 43.50%, a year-on-year decrease of 5.57 pcts.

(7) Auto parts: In 2023, the company accelerated mass production of products such as lidar motors for new energy vehicles, electric air conditioning compressor motor components, and aluminum die castings around the product's “multi-application field” strategy, and achieved revenue of 469 million yuan, up 43.14% year on year, gross profit margin 26.23% year on year, and -0.78 pct year on year.

Increase the development of new products and strategically lay out humanoid robots. The company's strategic layout focuses on the fields of humanoid robots, intelligent manufacturing equipment and industrial equipment and facilities, around a full range of “sliding screws, planetary balls and roller screws” products, innovating and developing high-precision screw technology to form the ability to mass-produce high-precision screw components; on the other hand, around “encoder+controller+hollow cup motor+precision gearbox” and “servo driver+controller+servo motor” products, the company has obtained 1303 authorized patents, including 120 invention patents, and 225 new patents were added in '23. Items, including 18 new invention patents.

Investment advice and valuation: The company's revenue from 2024 to 2026 is expected to be RMB 3.495 billion, RMB 3,942 million and RMB 4.479 billion respectively, with revenue growth rates reaching 13.6%, 12.8% and 13.6% respectively, and net profit to mother of RMB 355 million, RMB 438 million and RMB 486 million respectively. Net profit growth rates will reach 12.0%, 23.2%, and 11.1% respectively, maintaining the “plus” investment rating.

Risk warning: the development of the robot industry falls short of expectations; sales of household appliances are declining; the risk of rising raw material prices