Key points of investment
Annual & quarterly results fell short of market expectations. The company's revenue for 23 years was 1.06 billion yuan, up 40%, net profit to mother of 120 million yuan, down 24%, gross margin of 41%, same decrease of 1 pct, of which Q4 revenue was 300 million yuan, +11%/+15%, net profit to mother 0.3 billion yuan, same profit -47%/+10%, gross profit margin of 41%, and 2.3/+0.6pct, slightly lower than market expectations. The company's Q1 revenue in '24 was 270 million yuan, +16%/-11%, net profit to mother of 0.3 billion yuan, -17%/-15% month-on-month, gross profit margin 38%, and -3/-3 pct. Affected by equity payments and overseas sales expenses, it was slightly lower than market expectations.
Affected by fluctuations in copper prices, gross margin declined slightly, and the share of offshore + incentive fuses increased. The company's car-side revenue in '23 was 60 billion yuan, up 55%, accounting for 56%, with a gross profit margin of 39.3%, and an increase of 0.8 pct. In Q1, we expect vehicle side revenue of 150 million yuan, accounting for 55%, and gross margin to drop to around 37%, mainly due to rising copper and silver prices. With the development of hedging, production line side cost reduction and efficiency, we expect subsequent gross margin to return to 40%. The company encouraged sales of 450,000 fuses in 23, an increase of 202%, contributing nearly 50 million yuan, accounting for 4-5% of total revenue, overseas sales of 60 million yuan, an increase of 102%, accounting for 5.7% of total revenue, and an increase of 1.7 pct. We expect to maintain 1-2 times growth in incentive fuses in 24-25 years. Overseas fuses are fixed to be released in 25-26 years. Overall, we expect electric vehicle revenue to grow 35% + in '24, and return to 40% + in '25.
Competition for wind and solar storage-end products has intensified, and demand for energy storage continues to grow at a high rate. The company's revenue in 23 was 350 million yuan, an increase of 24%, accounting for 33%, a decrease of 4.4 pct, and a gross profit margin of 44.8%, and a decrease of 3.6 pct. In Q1 of '24, we expect the revenue of the wind storage side to remain at 190 million yuan, accounting for 33%, and the gross margin fell to about 40%, which is the impact of increased competition in the industry. We expect the company's share of the domestic new energy market to be 30-40% and the energy storage market share to 40% in '23. In 24, we expect domestic PV installations to increase 15%, energy storage installations to increase by 60% +, and industry demand nearly 30%. Competition in this market is relatively fierce. Competitors such as Haoli Technology are aggressive in price. The company is expected to drop the price by 10% + in 24. The new solutions launched later have plenty of room to reduce costs, and orders are concentrated on high-profit products. It is expected that the gross margin can still be maintained at 40%.
Expense rates rose sharply during this period, mainly due to increased sales expenses due to overseas expansion and payment of equity expenses.
Expenses for the Q1 period in '24 were 80 million yuan, +28%/-9%, and the period expense ratio was 28.4%, +2.7/+0.6pct; net cash flow from operating activities in Q24 was -0.3 billion yuan, +59%; 24Q1 capital expenditure was 0.3 billion yuan, or -42%, with cash in hand of 140 million yuan, down 35% from the beginning of '24; and the inventory at the end of 24Q1 was 210 million yuan, up 7% from the beginning of '24.
Profit forecast and investment rating: Considering fluctuations in raw material prices and increased competition in the industry, we lowered net profit from 24-25 to 1.54 billion yuan (original forecast 217/418 million yuan), up 31%/67%, corresponding to PE 39/24 times, and added a net profit forecast of 436 million yuan for 26 years, an increase of 70%, corresponding to PE 14 times, to maintain a “buy” rating.
Risk warning: Fluctuating raw material prices and market competition increase risk.