Brief performance review
On April 25, 2024, the company released its quarterly report for the year 24. 1Q24 achieved operating income of 549 million yuan, a year-on-year increase of 3.96%, and realized net profit to mother of 70 million yuan, a year-on-year decrease of 3.03%.
Management analysis
There was little change in the company's performance in the first quarter, which we believe was mainly due to the still weak domestic recovery. The company's 1Q24 revenue increased slightly and profit declined slightly. We think it is mainly because the company's revenue is still mainly in the domestic market. According to data from the Machine Tool Industry Association, new orders for metalworking machine tools fell 9.6% year on year from January to February '24, orders in hand fell 14.9% year on year, and domestic demand side recovery is still weak.
With the support of large-scale equipment renewal policies, domestic market sentiment is expected to pick up. On March 27, '24, seven departments jointly issued the “Implementation Plan to Promote Equipment Renewal in the Industrial Sector”, which specifically proposed “focusing on promoting the renewal of machine tools that have been in service in the industrial mother machine industry for more than 10 years”. Considering that the last round of Chinese machine tool market consumption peak was around 2011, there is currently a large stock of equipment to be replaced. With the support of the equipment renewal policy, it is expected that the release of demand for renewal will be strengthened and the boom in the machine tool industry will be boosted.
Continue to be optimistic about the growth prospects of going overseas. The company achieved overseas revenue of 705 million yuan in '23, a significant year-on-year increase of 112.99%, and its share of revenue increased to 30.36%. While overseas revenue is growing at the same time, gross margin is also rising. In '23, the gross profit margin for overseas sales was 31.35%, up 3.58 pcts from the previous year. The company actively explores overseas markets and has established a dedicated overseas sales network. The products have been sold to more than 50 countries or regions, and the share of overseas revenue is expected to increase further in the future, contributing to a significant increase in performance. According to Wind data, China's machine tool exports increased 13.6% year-on-year from January to March '24, and export data continued to grow.
Profit Forecasts, Valuations, and Ratings
The company is expected to achieve net profit of 375/4.45/536 million yuan from 24 to 26, respectively, corresponding to the current PE17X/14X/12X. Considering that the company's performance is better than the industry level and the share of overseas revenue has increased, it is expected that it will continue to maintain a high growth trend as production capacity expansion continues to maintain a high growth trend and maintain a “gain” rating.
Risk warning
The recovery in the machine tool industry fell short of expectations, and the ban on restricted stocks was lifted.