2023 results are in line with market expectations
The company announced its 2023 and 1Q24 results: in 2023, the company achieved revenue of 1.05 billion yuan, an increase of 3.18% over the previous year; net profit to mother was 242 million yuan, corresponding to profit of 0.81 yuan per share, an increase of 138.24% over the previous year, mainly due to the steady recovery of China's bearing industry. 1Q24 achieved revenue of 276 million yuan, up 6.85% year on year; net profit to mother was 52 million yuan, corresponding to profit of 0.18 yuan per share, up 1.29% year on year. The results for '23 and 1Q24 were in line with market expectations.
The gross margin of the main business increased, and profitability improved significantly. The company's comprehensive gross margin in 2023 was 35.81%, up 5.98ppt year on year; net profit margin was 21.88%, up 12.45ppt year on year. Profitability increased significantly in 2023, mainly due to the continuous increase in the automotive sector's business share. By product, the gross margin of the company's metal-plastic polymer self-lubricating rolled bearings was 49.31%, up 7.52ppt; bimetallic boundary lubricated rolled bearings, up +9.99ppt year on year; and the gross margin of metal-based self-lubricating bearings was 34.19%, up +9.03ppt year on year. Looking ahead, we think that as the company gradually replaces domestic production in automotive self-lubricating bearings and other fields, its gross margin may continue to increase steadily.
Development trends
Automotive self-lubricating bearings are expected to continue to drive the company's steady growth. Compared with the field of construction machinery, automotive self-lubricating bearing technology has higher barriers, and gross margin has remained above 40% in recent years. At present, the company has promoted its products to various models including BMW, Volvo, Jaguar, Tesla, Audi, Volkswagen, etc., and is gradually expanding some new energy models. We believe that the company will continue to replace domestic products with its price advantage and speed of response, and the automobile business is expected to become the company's main growth point. At the same time, the company's customer distribution covers countries and regions such as Europe, America, Japan, South Korea, and India. We believe that the decentralized regional distribution can reduce the operating risks caused by fluctuations in the single market and position the company in a more favorable position in future competition.
The “roll-over” of wind power is progressing smoothly and is expected to open up new markets in '24. We believe that sliding bearings in the field of wind power are expected to replace rolling bearings due to their performance and cost advantages. The company's product G2301CSB-WPB sliding bearings for wind power spindles have advantages such as high strength, good wear resistance, and high carrying capacity. Testing has now begun on gearbox bearings, and it is expected that spindle bearings will be further replaced in the future. We learned that the company's sliding bearing products have been tested on the OEM. The company has a first-mover advantage in the field of wind power sliding bearings, which is expected to open up new markets and increase the company's revenue this year.
Profit forecasting and valuation
Considering the steady growth of the company's automotive bearing business, the wind power business is expected to open up the market. We kept the 2024 profit forecast of 298 million yuan unchanged, and introduced a net profit of 353 million yuan for 2025. The current stock price corresponds to a price-earnings ratio of 15.0 times/12.6 times for 2024/2025. Considering the steady growth of the company's automotive bearing business, we maintained an industry rating and target price of 21.05 yuan, corresponding to 21.1 times the price-earnings ratio of 2024 and 17.8 times the price-earnings ratio of 2025, with 41.4% upward space compared to the current stock price.
risks
The industrialization process of wind power falls short of expectations; the risk of upstream raw material price fluctuations; the risk of international trade friction.