Key points of investment
In Q1 2024, net profit to mother was 42 million yuan, down 4.9% year on year. According to the company's 2024 quarterly report, realized revenue of 442 million yuan, up 1% year on year; realized net profit to mother was 0.42 million yuan, down 4.9% year on year; net profit after deducting non-return to mother was 40 million yuan, down 1.8% year on year.
Profitability is basically stable: 2024 Q1 gross profit margin of 42.47%, year-on-year -0.99PCT, net profit margin 10.21%, year-on-year -1.57PCT. The gross margin decreased slightly, or the expansion of production of environmental testing services and integrated circuits climbed and depreciation increased.
Expense side: The company rate for the 2024 Q1 period was 31.13%, +2.18PCT year-on-year. Among them, the sales rate was 8.11%, +1.32PCT; the management rate was 13.17%, -0.19PCT; the financial rate was 1.93%, +0.1PCT; and the R&D rate was 7.93%, +0.97PCT.
Production capacity for environmental testing services and integrated circuit testing has been released one after another; it is expected that development companies in emerging fields such as the low-altitude economy will continue to increase test capacity building such as environment and reliability, integrated circuit verification and analysis, and electromagnetic compatibility. Capacity expansion+downstream expansion is expected to jointly promote steady growth in medium- to long-term performance.
Environmental testing equipment: Achieved revenue of 753 million yuan in 2023, an increase of 23% over the previous year. The company continues to consolidate the competitive advantages of large-scale, complex and integrated test systems, and has achieved certain technical breakthroughs in hydraulic test system research and development. Benefiting from the integrated development and expansion of production capacity of environmental testing equipment and services, good supply and demand in the equipment sales business, and significant growth in customers in the new energy industry and testing institutions.
Environmental testing service: Achieved revenue of 1.03 billion yuan in 2023, an increase of 19.45% year-on-year. Improve test capacity building+application field expansion to promote steady growth in performance: the company's laboratory subsidiaries continue to increase investment in new energy, energy storage, aerospace, wireless communications, medical devices, etc., build special laboratories in Mianyang, Guizhou, etc., and prepare Thai laboratories to begin a global strategy. As of the 2023 annual report, the company has basically completed the priority layout of production capacity. Early fund-raising projects have all achieved target economic benefits, and the scale of the laboratory has been further expanded. The company is speeding up the construction of the NEV product testing center expansion project and the fifth-generation mobile communication performance testing technology service platform project, which is expected to be officially put into operation in the second half of 2024.
Integrated circuit verification and analysis: Achieved revenue of 257 million yuan in 2023, an increase of 2.34% year over year. Shanghai Yite achieved revenue of 281 million yuan and net profit of 43.82 million yuan in 2023. Due to the rapid expansion of equipment production capacity and talent reserves, operating costs have increased, and profitability has been affected to a certain extent in the short term. Yite is leading the technology in the industry and is one of the industry leaders. In December 2022, it increased capital by 380 million yuan to expand production capacity. The equipment is expected to be basically in place and installation and commissioning completed in 2024Q2, and production capacity will be released later. The gross margin is expected to be repaired, leading to an increase in profitability.
The company is a leader in environmental and reliability testing in China. Downstream customers cover low-altitude aviation, drones, satellite internet and other industries. It has a complete range of environmental test equipment, and can provide testing services for the entire industry chain from chips to components to terminal products, and is expected to benefit as a priority in the industrialization process of emerging industries.
Profit forecasting and valuation
The company's net profit for 2024-2026 is estimated to be 3.8, 4.8, and 60 billion yuan, up 21%, 26%, and 25% year-on-year, with a compound growth rate of 24%, corresponding to PE of 18, 15, and 12 times, maintaining a “buy” rating.
Risk warning: the progress of production capacity expansion falls short of expectations; market competition intensifies; downstream prosperity declines