Net profit for the full year turned a loss into a profit. Card Hinge benefited from folding screen placement, Jingyan Technology achieved revenue of 2.196 billion yuan (YoY: -12.44%) in 2023, and net profit of 166 million yuan (YoY: 171.56%, adjusted). Looking back at 2023, we see that: 1) revenue was phased under pressure due to fluctuations in demand and design changes from major overseas customers and the decline in demand for medical precision plastic products and terminal products, but the company increased development of other consumer electronics customers and vigorously developed traditional and cooling businesses; 2) The company turned losses into profits, with a gross margin of +7.19pct to 29.44% year over year, and profitability improved dramatically. Looking ahead to 2024, folding screens are expected to expand, driving the company's related business growth; the company will continue to improve internal efficiency and focus on profitability. We are optimistic about the launch of the new project, but considering that the total demand in the consumer electronics market is still lackluster, the company was given a net profit of 2.75/3.22/410 million yuan in 24/25/26 (pre-24/25 value: 2.82/323 million yuan). Considering the MIM business's development potential in the folding screen market and the strategic layout of heat dissipation, precision plastics, etc., 22x 24-year PE (comparable company average value 15.3x) was given, and a target price of 32.6 yuan was given, maintaining the purchase rating.
2023: The decline in revenue from major overseas customers puts pressure on the MIM business. The transmission cooling business grew steadily by business. The revenue of MIM parts and components/drives, cooling components, and other/precision plastic parts and components/terminal products was -14.34%/+26.88%/-20.22%/-59.19%, respectively. We have seen: 1) the revenue scale of MIM parts and components declined due to fluctuations in demand from major overseas customers, design changes, etc., while revenue from other customers in the MIM sector increased; 2) benefiting from the increase in demand for folding screen hinges and motor+gearbox business in the transmission sector, and steady growth in revenue for transmission and cooling components; 3) The revenue scale of automotive precision plastic parts increased by 31.60% year on year, but due to intense competition in the industry, the revenue scale of precision plastic parts and components declined; 4) Due to intense competition in the industry, customer demand declined; etc Due to factors, terminal product revenue declined year-on-year.
2024: Optimistic about the company's card position advantage in folding screen hinge-related businesses. According to IDC, China shipped about 7.07 million folding machines in 2023, an increase of 114.5% over the previous year. Since 2024, mobile phone manufacturers such as Huawei, Honor, and Vivo have successively launched new folding phones. The company actively serves major mobile phone terminal customers, expanding from the hinge MIM parts business to the hinge assembly business, and has mass-produced hinge products for various folding screen phones. The company will continue to lay out the development of new materials for the development of the folding screen business and cooperate closely with customer R&D to meet the needs of folding screen phones for thinner, lighter, and more wear-resistant performance. Looking forward to the future, we are optimistic about the company's card position advantage in the folding screen hinge-related business, and look forward to the increase in revenue brought about by the introduction of the company's products to more brand customers.
The target price was given at $32.6, maintaining the buy rating
We gave the company a net profit forecast of 275/322/410 million for 24/25/26. Referring to the average expected average value of 15.3 times PE for the comparable company's 2024 Wind, considering the company's MIM business development potential in the folding screen market and the strategic layout of heat dissipation and precision plastics sectors, the 2024 PE valuation was 22 times, and the target price was 32.6 yuan, maintaining the purchase rating.
Risk warning: MIM process penetration rate falls short of expectations; folding screen phone shipments fall short of expected risk.