The company released its 2023 annual report and 2024 quarterly report. Profit margins improved in 23, 24Q1 revenue and profit increased year-on-year, and maintained an increase in holdings rating.
Key points to support ratings
Industry fluctuations did not change steady operation, and the company's performance continued to grow for the full year of 2023. In 2023, the company achieved revenue of 4,519 billion yuan, an increase of 1.96% over the previous year. The company achieved net profit of 496 million yuan, an increase of 14.17% year on year, and realized deducted non-net profit of 489 million yuan, an increase of 12.35% year on year. In terms of profitability, the company's gross profit margin in 2023 was 21.32%, up 2.49 pcts year on year, 10.97% year on year, 1.17 pcts year on year, net profit margin 10.82% year on year, and 1.00 pct year on year. In the first quarter of 2024, the company achieved revenue of 1,093 million yuan, +7.71% YoY/-6.56%, realized net profit of 109 million yuan, +44.73% YoY/-10.32% YoY, and realized deducted non-net profit of 108 million yuan, or -45.90% YoY/-11.60% YoY. The company achieved a gross profit margin of 20.48% in 2024Q1, +1.45 pcts/month-on-month, and 9.93% net profit margin, +2.60pcts year-on-year, +2.60pcts year-on-year. The above changes are mainly due to: 1) continuous optimization of the company's product structure; 2) improvement in the company's production efficiency and reduction in unit costs; 3) sales model optimization and reduction in customer acquisition costs.
The fund-raising project was successfully put into operation, and two-wheel drive growth in domestic and foreign markets. Domestic side: 1) The company has carried out technical exchanges and new product development and verification with some domestic first-tier brand customers in the fields of automotive electronics, consumer electronics, industrial control, etc., and some of the products developed in the early stages have already been mass-produced; 2) The company planned a new circuit board construction project with an annual output of 3 million square meters. The corresponding production capacity of the second phase is 1.5 million square meters. The overall production capacity of the Heshan headquarters is expected to increase to 7 million square meters after delivery; overseas Aspects: 1) The company has successfully passed the certification of customers such as Amazon and Samsung and entered the Nvidia supply chain through OEM; 2) the products of customers such as Sharp, Konica Minolta, and Amphenol, which the company obtained certification earlier, have achieved mass production; 3) The company has established wholly-owned subsidiaries in Japan and Singapore.
Deeply cultivate areas of advantage and expand emerging sectors. 1) Automobile sector: In 2023, the company has achieved the supply of new energy vehicles for brands such as Tesla, BMW, Volkswagen, Porsche, Chrysler, Mercedes-Benz, Xiaopeng, GAC, Great Wall, etc., and the company will continue to introduce new customers, new models, and new products. The company's cooperation with T customers has been further deepened, and it has entered its supply chain for new products such as photovoltaics and energy storage based on the same technology development; 2) AI sector: The company has achieved mass production capacity of 24-layer hard boards, 5-stage HDI (including any layer interconnection), 6oz thick copper multi-layer boards, multi-layer soft boards, and multi-layer HDI soft-hard board, and multi-layer HDI soft and hard board, which has basically covered the process requirements of mainstream AI servers. The company has become the main supplier of PCB products such as high-layer and high-density interconnected hard boards and vehicle specifications for N customers. The company is expected to seize new opportunities in the industry and shape new advantages.
valuations
Considering that the AI and NEV boom continued to rise in 24, the company actively promoted cooperation with major international customers and was deeply involved in developing new products, but considering that the overall PCB environment is still showing a weak recovery trend, and competition on emerging tracks is becoming increasingly intense. We expect the company to achieve revenue of 54.23/62.63/6.955 billion yuan in 2024/2025/2026, respectively, and realized net profit to mother of 6.05/7.22/845 million yuan, respectively. EPS was 0.92/1.10/1.28 yuan, corresponding to 2024-2026 Annual PE was 18.6/15.6/13.3 times, respectively. Maintain an increase in holdings rating.
The main risks faced by ratings
The risk of changes in the relationship between supply and demand due to macroeconomic fluctuations, drastic expansion of industry production capacity, risk of falling product prices due to intense competition, and the introduction of new products falling short of expectations.