Matters:
On April 24, 2024, the company released its 2023 annual report: the company achieved revenue of 4.519 billion yuan (YOY 1.96%), gross profit margin of 21.32% (YOY +2.49pct), net profit to mother of 496 million yuan (YOY 14.17%), deducting non-net profit of 489 million yuan (YOY 12.35%) in 2023. Q4 achieved revenue of 1.17 billion yuan (YOY 7.43%), gross profit margin of 24.87% (YOY -1.50pct), net profit to mother of 121 million yuan (YOY -10.92%), deducting non-net profit of 123 million yuan (YOY -10.47%).
At the same time, the company released a performance report for the first quarter of 2024: the company achieved revenue of 1,093 million yuan (YOY 7.71%), gross profit margin of 20.48% (YOY +1.45pct), net profit to mother of 109 million yuan (YOY 44.73%), deducting non-net profit of 108 million yuan (YOY 45.90%) in Q1 of 2024.
Commentary:
Performance grew steadily in 23 years, and product structure optimization and exchange rates influenced high performance growth in 24Q1. In '23, the company was deeply involved in core areas, achieving revenue of 4,519 billion yuan, an increase of 1.96% over the previous year. Benefiting from the combined effects of factors such as increased business volume, higher product unit prices, lower raw material prices, and a decline in the exchange rate of RMB against the US dollar, the company achieved net profit of 496 million yuan, an increase of 14.17% over the previous year. 24Q1 saw steady growth in business scale and the production capacity of fund-raising projects released 24Q1 revenue growth of 7.71% to 1,093 billion yuan, and profit side 24Q1 achieved net profit of 109 million yuan (YoY 44.73%). There are three main factors: (1) rising revenue (2) continuous optimization of the company's product structure, increasing the share of high value-added products, and (3) the decline in the exchange rate of RMB against the US dollar made a positive contribution.
The automobile & digital communication business is two-wheel drive, and the company can be expected to grow. The long-term development trend of new energy vehicles has been determined. Electrification and intelligence have led to an increase in the share of automotive electronics and a sharp rise in the volume and price of automotive PCBs. The company set up the automotive PCB business in 2010 and established partnerships with leading customers including Tesla, Volkswagen, BMW, Luminar, and HL-Klemove (Korea Autonomous Driving Solution Provider). The company's automotive business has a significant first-mover advantage. The application and development of artificial intelligence content automatic generation technology represented by ChatGPT is inseparable from huge computing power support, and the demand for high computing power places higher demands on the material, number of layers, and processing technology of PCBs. According to Prismark's forecast, the output value of server/storage PCBs reached US$14.201 billion in 2027, and the compound growth rate reached 7.6% in 2027, ranking first in the growth rate of major downstream application areas. In new fields such as AI, the company has carried out technical exchanges and new product verification with some domestic and foreign first-tier brand customers. Among them, high-multi-layer ultra-low loss server PCBs in cloud data centers have achieved mass production of 24-layer ultra-low loss servers and 5G communication PCBs, 28-layer products also have manufacturing capacity, and have applied precision HDI and traditional high-multilayer mixing technology, ultra-accurate inter-layer alignment deviation control technology, high-precision backdrilling technology, high-frequency signal characteristics, and loss control technology.
Profit forecasting and investment advice. The company has high-quality texture and has maintained steady growth over a long period of time. The company has broad development prospects in the context of the development of the automotive & digital communication PCB industry. We forecast the company's net profit for 2024-2026 to be 613/7/823 million yuan. Referring to the valuation situation of comparable companies such as Shanghai Electric Power Co., Ltd., the company was given a price-earnings ratio of 24 times in 2024, with a target price of 22 yuan, maintaining a “strong push” rating.
Risk warning: raw material prices rise, exchange rate fluctuations, downstream demand falls short of expectations.