1Q24 revenue fell slightly short of expectations, and profit increased steadily
Joyson Electronics 1Q24 had single-quarter revenue of 13.28 billion yuan (yoy +0.4%), net profit to mother of 310 million yuan (yoy +53.1%), gross profit margin of 15.5%, -2.9pp month-on-month, and +2.6pp year-on-year. We have seen: (1) the profitability of the company's safety business is steadily recovering. The gross profit margin of the 1Q24 auto safety business was 13.9%, about +3.8pp; (2) revenue was basically the same year over year, slightly lower than our previous expectations (+3.6%), but the company's new orders have grown rapidly in the past two years, and we are concerned about the time of revenue conversion. Based on the SOTP valuation, considering that the company's overseas share is more affected by global macroeconomic uncertainty and the large revenue growth rate is slow, maintaining the automotive electronics/safety business 0.74/0.35EPS in 2024, corresponding to 24.8/14.5X PE, respectively (all with a 15% discount compared to the company's PE average value), and a target price of 23.34 yuan was given, maintaining a “buy” rating.
1Q24 review: Safety business revenue growth accelerated, and gross margin increased significantly in 1Q24: the company's main automotive electronics business revenue was about 4 billion yuan (yoy -1.5%), gross profit margin was 19.4%, about -0.6pp year on year; automobile safety business revenue was about 9.3 billion yuan (yoy +1.4%), with a gross profit margin of 13.9%, or +3.8pp year-on-year. Mainly due to the rapid recovery in gross margin of the automobile safety business, the company's comprehensive gross margin/net margin was 15.5/2.9%, +2.5/1.4pp year over year, and -2.9/+0.3pp compared to the previous month.
We see that due to factors such as the off-season in Q1 car sales, the company's overall revenue was basically the same (+0.4%) year on year, but net profit without return to mother recorded a net profit of 310 million yuan, an increase of 134.2% year on year, and profitability maintained a steady upward trend. 1Q24 has obtained approximately 239.59 billion yuan in automotive safety/automotive electronics orders, of which automobile safety orders have reached more than half of the total order for 23 years (43.4 billion yuan).
2024 outlook: The profit margin of the safety business is increasing steadily. Looking at the current order conversion situation of automotive electronics, we see: (1) Automobile safety: Compared with the foreign car safety leader Autoliv 4Q23, the gross margin of the company has reached 17.4%, and the company's gross margin still has a lot of room for improvement. We are optimistic that the company's gross margin will continue to improve under order price compensation and management optimization. (2) Automotive electronics: The company has signed new orders in the fields of 800V high voltage fast charging, intelligent connectivity, and cockpit domain control, and is expected to gradually contribute more from 2024, and we have seen the smooth progress of smart driving domain control cooperation between the company and Horizon, etc., and pay attention to subsequent targeted disclosures. (3) In terms of cash flow, the company obtained a net operating cash flow of 690 million yuan, but long-term loans increased to 14.11 billion yuan, focusing on the company's plans to control the balance ratio in the future.
Target price of 23.34 yuan, maintaining “buy” rating
We are optimistic that the company, as a leading enterprise in the field of automotive electronics and vehicle safety, will benefit from the development opportunities of the electrification/intelligent industry and high barriers to passive safety, and achieve continuous improvement in performance. We maintain the 24/25/26 revenue forecast of 608.2/662.1/71.09 billion yuan, maintain the net profit forecast of 15.3/20.5/2.44 billion yuan, and give the automotive electronics/safety business 24.8/14.5X PE in 2024, corresponding to a target price of 23.34 yuan, maintaining a “buy” rating.
Risk warning: Profitability recovery is less than expected; overseas car companies' intelligent progress is slow.