Incident: After the market on April 23, the company released its 2023 annual report and 2024 quarterly report.
The performance was in line with expectations; net profit to mother increased 137% year on year in 2023, up 1.29% year on year in 24Q1. In 2023, the company achieved operating income of 1.05 billion yuan, up 3.18% year on year; net profit to mother was 242 million yuan, up 137.26% year on year. Looking at product breakdown, metal-plastic polymer self-lubricating rolled bearings were 366 million yuan, up 9.03% year on year, accounting for 33.07% of revenue; bimetal boundary lubricated rolled bearings were 197 million yuan, down 13.43% year on year, accounting for 17.85% of revenue; and metal based self-lubricating bearings were 219 million yuan, up 5.18% year on year, accounting for 19.77% of revenue. The 2024Q1 company achieved revenue of 276 million yuan in a single quarter, up 6.85% year on year and down 3.49% month on month; net profit to mother was 52.23 million yuan, up 1.29% year on year and down 17.9% month on month.
Profitability increased significantly. The gross profit margin and net margin increased by 6.43 and 12.45 pct, respectively. Profitability in 2023 was approximately 35.81%, 21.88%, and 20.03% of gross sales margin, net profit margin, and non-net interest rate, respectively, up 6.43, 12.45, and 5.19 pcts year-on-year. The significant increase in profitability is mainly due to 1) product structure optimization: an increase in the share of revenue in the automotive sector with high gross margins; 2) stabilization of raw material prices. Among them, the gross profit margin of metal-plastic polymer self-lubricating rolled bearings was 49.31%, up 7.52pct year on year; the gross profit margin of bimetal boundary lubrication rolled bearings was 27.21%, up 9.99pct year on year; and the gross profit margin of metal-based self-lubricating bearings was 34.19%, up 9.03 pct year on year. 2024Q1's gross profit margin in a single quarter was 34.29%, down 3.18 pcts year on year and 0.31 pct month on month; net sales margin was 19.21%, down 0.62 pct year on year, down 2.41 pct month on month.
The decline in 2024Q1 profitability was mainly due to changes in product structure.
Cost side: In 2023, the cost rate was 10.95%, a year-on-year decrease of 0.23pct. Among them, sales, management, R&D, and financial expense ratios were approximately 1.86%, 5.69%, 4.49%, and -1.10%, respectively, with year-on-year changes of +0.19, -0.11, +0.36, and -0.66 pct, respectively. The cost rate during 2024Q1 was 11.86%, a year-on-year decrease of 2.28pct.
Under the “roll-over” trend, the NEV and wind power industries continue to open up market space. According to the Precedence Research report, the global bearing industry market size is about US$13.2 billion in 2022; the bearing industry market is expected to grow at a compound rate of about 8% from 2023-2032, and the market size will exceed US$279.8 billion by 2032. According to the QY Research report, China's bearing production reached about 275 billion sets in 2023, an increase of 6.18% over the previous year, showing strong market demand and production capacity. At present, sliding bearings have gradually replaced traditional rolling bearings in some fields. According to data from the Huajing Industrial Research Institute, the market size of China's sliding bearing industry has risen from 10.497 billion yuan in 2017 to 16.512 billion yuan in 2022. Looking at market segments, the market size of self-lubricating bearings in 2022 was 13.995 billion yuan, accounting for about 85% of the total size; the market size of other sliding bearings was 2,517 billion yuan, accounting for about 15%. As future machines develop in the direction of high speed and high power, the requirements for bearing performance will become higher and higher, and the application field of sliding bearings will be further expanded.
Under the “roll-over” trend, industries such as new energy vehicles and wind power will continue to open up market space.
Profit forecasting and valuation
The estimated net profit for 2024-2026 will be 2.82, 3.34, and 398 million, up 16%, 18%, and 19% year-on-year, with CAGR = 19%. The corresponding PE is 16, 14, and 12 times, maintaining the “buy” rating.
Risk warning: 1) Demand for construction machinery and automobile production and sales fall short of expectations; 2) Prices of raw materials have risen.