Gross margin continued to increase month-on-month. Due to changes in the stock prices of participating companies, profit fell slightly short of expectations. The company achieved revenue of 550 million yuan in 2024 Q1, YOY -10%, and QoQ -51.8%. Net profit attributable to mother was 55 million yuan, yoy -29.5%, qoq -45.5%, realized net profit deducted from non-return mother of 171 million yuan, yoy +29.3%, and qoq -29.7%. The net profit level after deducting non-return to mother exceeded previous forecasts. 2024Q1 gross margin and net margin were 44.0%/11.4%, respectively, +5.0/+2.5pct month-on-month, respectively. In terms of cost rates, 2024Q1 sales/management/R&D/finance expenses were 10.8%/5.5%/13.4%/1.4%, respectively, and -0.9/+1.0/+3.1/+0.6pct compared to 2023Q4, respectively. Among them, profit and loss from changes in fair value - RMB 26 million, are mainly due to changes in the stock price of the participating company Kaiweite. 2024Q1 domestic revenue was 50 billion yuan, yoy -11.1%, gross margin was 43.6%, yoy+12.8pct; overseas revenue was 37 million yuan, yoy +5.6%, gross margin was 47.4%, yoy+4pct. We maintain our previous profit forecast. The company's profit forecast for 2024-2026 is 565/7.00/898 million yuan, EPS is 1.28/1.58/2.03 yuan, and PE corresponding to the current stock price is 14.9/12.0/9.4 times, respectively, maintaining a “buy” rating.
The profitability of the new energy business continued to increase month-on-month. The company's 2024Q1 NEV electronic control business achieved revenue of 419 million yuan, yoy -12.2%, and qoq -54.6%, mainly due to increased competition in the domestic industry. The company screened some low-price orders. The gross margin was 41.2%, qoq+4pct, increasing for 7 consecutive quarters since 2022/Q2.
Failure to confirm orders for the engineering transmission business will affect the company's performance. Waiting for the inflection point to arrive, the 2024Q1 engineering transmission business revenue was 62 million yuan, yoy -29%, and qoq -57%. The year-on-year decline was mainly due to downstream industry sentiment falling short of expectations, resulting in the company's product acceptance falling short of expectations. The gross margin was 40.2%, qoq-6.9pct. In 2023, the company's engineering transmission products became a leading domestic brand in the field of large-scale natural gas transportation in the national pipeline network, and became a leading domestic brand in market segments such as deep-well full frequency conversion drilling rigs, large-scale oil and gas fracturing, large-scale steel rolling, and shield machines. The main drives of the 1700 cold rolling and 1450 hot rolling lines were shipped overseas; they continued to lead in large-scale test benches such as gearbox testing, and achieved overseas sales.
Risk warning: New energy electronic control business cost reduction falls short of expectations; traditional engineering industry demand falls short of expectations