The company's 1Q24 performance was higher than our expectations
The company announced its 2023 annual report and 1Q24 results: 2023 revenue of 923 million yuan, +25.0% year on year, net profit to mother of 202 million yuan, +38.5% year over year, slightly lower than our expectations, due to lower revenue than expected. 1Q24 achieved revenue of 242 million yuan, +31.7% year on year, net profit to mother of 65 million yuan, +58.6% year over year. 1Q24's performance was higher than our expectations, due to high revenue growth and increased profitability.
Development trends
Profitability reached a record high, performance continued to increase, and ADAS cleaning and humanoid robot businesses expanded at an accelerated pace. In 2023, the company's overall gross profit margin was 35.4% and the net profit margin was 21.8%; 1Q24 achieved a single quarter gross profit margin of 36.8% and a net profit margin of 26.8%, and its profitability reached a record high. According to the annual report, the company's ADAS cleaning products have been adapted to many customer road tests and systems, and will be targeted in small batches in 2023, and more incremental models will be targeted in 2024; in the field of humanoid robots, relying on self-developed harmonic magnetic field motor technology and new magnetic materials, the company has mature solutions and physical sampling capabilities to OEMs. In 2024, it will focus on matching customized scenarios such as frameless torque motors and hollow cup motors.
ADAS cleaning systems accelerate penetration along with intelligent driving, and Tesla Robotaxi may be equipped. The ADAS cleaning system can ensure the continuous use of sensors such as cameras and radars, effectively guarantee driving safety and improve the reliability of smart driving. As advanced smart driving accelerates penetration, we believe it is expected to become a standard safety solution for smart cars. Tesla has begun mass production of ADAS cleaning systems with Cybertruck, and we expect that all of its Robotaxis will be equipped with ADAS cleaning systems. We estimate that the value of ADAS bicycle cleaning equipment exceeds 1,000 yuan, and the market space is tens of billions of yuan, which is 10-15 times that of traditional cleaning systems. We believe that as a leader in cleaning systems, ADAS cleaning has deep cooperation with industry leaders such as Tesla and Valeo, and is expected to achieve rapid growth in the era of intelligent driving with technical barriers and customer advantages.
The motor business continues to increase profits, and new products and new scenarios such as harmonic magnetic field motors and robot motors are expanding at an accelerated pace. In 2023, the company's motor business achieved revenue of 370 million yuan, an increase of 38% over the previous year. The company continues to release products such as “four doors and two covers”, ABS motors, and charging doors, and continues to increase innovation in technology, products, and scenarios, and has achieved breakthroughs in harmonic magnetic field motors and new magnetic materials. We anticipate that harmonic magnetic field motors may be mass-produced in 1H24 and extended to industrial/human/wheeled robots based on technical and cost advantages.
We believe that the company relies on motors as the cornerstone product and extends from a single motor to assembly and systematization to accelerate the development of new high-barrier products and new scenarios, which is expected to shape deeper comprehensive barriers. We expect that according to Tesla's expectations for mass production of humanoid robots in 2025, related products are expected to enter a fixed cycle of 2H24.
Profit forecasting and valuation
Considering the company's high revenue growth rate and increased profitability, we raised net profit in 2024 and 2025 by 3.2%/6.8% to 312/432 million yuan, respectively. The current stock price corresponds to the 2024/2025 price-earnings ratio of 20.1x/14.5x. Maintaining an outperforming industry rating, keeping the target price of 112.03 yuan unchanged, corresponding to the price-earnings ratio of 28.8 times/20.8 times in 2024/2025, with 42.71% upside compared to the current stock price.
risks
Raw material prices fluctuate, new business development did not meet expectations, new customer expansion fell short of expectations, etc.