Description of the event
On April 19, 2024, Hertai released its report for the first quarter of 2024: the company achieved operating income of 1,982 million yuan in 24Q1, +20.5% year over year; realized net profit of 97 million yuan, +18.1% year over year; realized deducted non-net profit of 82 million yuan, +12.7% year over year.
Incident comments
The company achieved a high increase in revenue, and there is a clear trend of restoration of the main business. The company achieved revenue of 1,982 billion yuan in 24Q1, an increase of 20.51% over the previous year. Among them, the controller business achieved revenue of 1,962 billion yuan, an increase of 22.29% over the previous year. For the first time, with the Spring Festival holiday in the first quarter, it achieved month-on-month growth in the first quarter compared to the fourth quarter, showing the company's current good customer demand and orders. The company achieved net profit of 97 million yuan, +18.1% year-on-year. Among them, the controller business achieved net profit of 104 million yuan to mother, an increase of 36.26% over the previous year. Overall, there is a clear trend of controller repair. Net profit due to the subsidiary Chengchang Technology was greatly affected by the subsidiary Chengchang Technology. Due to its Q1 loss of 15 million yuan, the company's total loss profit was affected.
The gross margin of the main business rebounded significantly year-on-year, and the Q1 expense ratio increased slightly. 24Q1 gross profit margin 16.8%, -0.4 pct year on year; net profit margin 4.3%, -0.9 pct year on year. Among them, the gross margin of the controller business segment increased by 0.73% year-on-year, mainly due to an increase in the company's order delivery and an acceleration in the pace of production organization; as product deliveries begin and capacity utilization increases, gross margin will be further restored. 23Q1 sales/management/finance/R&D expense rates were 2.1%/4.0%/1.0%/5.8%, respectively, +0.4pct/+0.1pct/-0.1pct/+0.5pct. The company reduces costs and increases efficiency through continuous supply chain optimization, R&D and design optimization, etc., strictly controls all costs and expenses, strengthens cost management, improves production and management efficiency, and maintains profit growth.
The global layout is perfect, and it occupies a favorable competitive position in overseas market expansion. The company has laid out R&D, operation centers and production bases in more than 20 countries and regions around the world, formed a mechanism close to customer service, and achieved rapid response to customer needs. In particular, breakthroughs have been made in the layout of overseas production bases. Among them, production bases in Vietnam and Italy have achieved large-scale mass production and stable operation; production bases in Romania have gradually achieved mass production, and profitability continues to increase; and construction of production bases in Mexico is progressing steadily and is scheduled to be put into operation this year. At the same time, the company's share of major customers has been steadily increasing, the scale of business continues to expand, and business expansion in overseas markets continues to accelerate. In the context of industrial globalization, the company will focus on increasing R&D investment in new fields, deepening overseas market layout, accelerating overseas market expansion, and increasing market share among major international customers.
Profit forecast and investment suggestions: The company's revenue grew, which was influenced by the subsidiary Chengchang Technology, and the performance declined slightly, but overall, the controller sector repair trend was obvious. Revenue increased 22.29% year over year, net profit to mother was +18.1% year over year, and gross margin increased 0.73% year on year. As the company continues to optimize supply chains and R&D design to reduce costs and increase efficiency, the main business is expected to continue to grow. Furthermore, the company's global layout is perfect, and most of its overseas bases have achieved large-scale mass production. As the overseas layout continues to deepen, it is expected that it will continue to increase its market share in overseas markets. We expect the company's net profit to be $565, 7.57, and 966 million yuan respectively, up 70%, 34%, and 28% year-on-year, corresponding to PE valuations of 18, 14, and 11 times, maintaining a “buy” rating.
Risk warning
1. Price fluctuations and supply risks of raw materials;
2. Market competition risk.