1Q24 results are in line with our expectations
The company announced 1Q24 results: operating income of 442 million yuan, +1.03% year over year; net profit to mother of 42.173 million yuan, -4.86% year over year; deducted non-net profit of 40.206 million yuan, -1.81% year over year, in line with our expectations.
Revenue in 1Q24 was basically the same year on year, and it is expected that the release of production capacity in various sectors will drive up the growth rate. By sector, we estimate: 1) Environmental testing equipment: 1Q24 revenue declined slightly year-on-year, and the share of new energy sources increased, and the 24-year boom in the specialty industry is expected to recover; 2) Environmental testing services: basically flat year over year, continuing new field expansion and laboratory network layout, 1Q24 new energy sector may maintain a high growth rate; 3) semiconductor testing: the year-on-year improvement is significant, but the profit side may still be under pressure. We judge that Yitec's current demand has picked up, orders have improved, and the performance is expected to improve in the second half of the year as equipment is gradually put in place and production capacity climbs.
Increased depreciation partly affects profitability, and it is expected that revenue growth will pick up to absorb the impact. The company's 1Q24 gross margin decreased by 1.0ppt to 42.5% year on year. We think it is mainly due to factors such as increased depreciation due to fixed asset investment. We estimate that equipment remained flat, services and semiconductors all declined slightly; net interest rate decreased by 0.6ppt to 9.5% year over year; 1Q24 sales/management/R&D/finance expense ratios were +1.32pp/ -0.19pp/ +0.97pp/-0.10ppt, respectively, and sales and R&D expenses increased year-on-year. The net outflow from operating activities in 1Q24 was 61.5 million yuan, a year-on-year decrease of 22.23 million yuan.
Development trends
Looking ahead to 24 years, the new downstream sector layout+production capacity expansion is expected to restore the growth rate. The company invests in production capacity on a rolling basis, accelerates the expansion of new energy, energy storage, aerospace, medical devices and other industries, and continues to increase integrated circuit verification, analysis and testing capabilities. We believe it is expected to promote the company's steady growth in the medium to long term. 1) New energy: Expansion of testing centers in Suzhou, Guangzhou, Shenyang, Chongqing, etc.; new laboratories in Thailand are expected to open in April 24; 2) Integrated circuits: We expect production expansion equipment to be put in place one after another in 24 years. The market is recovering or driving up profit levels, and the vehicle specification level is expected to further contribute to the increase.
Profit forecasting and valuation
We keep our 2024/25 profit forecast of 400/517 million yuan unchanged. The current stock price corresponding to 2024/2025 P/E is 17.9x/13.9x, respectively. Maintaining the outperforming industry rating and target price of 17.29 yuan, corresponding to the 2024/25 target P/E is 22.0x/17.0x, a potential increase of 22.6%, maintaining the outperforming industry rating.
risks
The new business has not progressed as expected, and operational efficiency has been slow to improve.