24Q1 had revenue of 549 million yuan/yoy +3.96%, net profit to mother of 70 million yuan/yoy -3.03% Neway CNC released a quarterly report. 2024Q1 achieved revenue of 549 million yuan (yoy +3.96%, qoq -5.75%), net profit of 70 million yuan (yoy -3.03%, qoq -14.90%), deducting non-net profit of 60 million yuan (yoy -10.10%). We maintain the company's profit forecast. The company's 2024-2026 EPS is expected to be 1.16/1.44/1.78 yuan, respectively. Comparable companies in 2024 Wind unanimously expected the average PE value to be 27.32 times. Considering the impact of the company's increased R&D investment on profitability and the possible deterioration of the industry competition pattern under weak recovery in domestic demand, the company was given 21 times PE in 2024, maintained a target price of 24.43 yuan, and maintained a “buy” rating.
24Q1 Profitability under pressure
2024Q1 company gross profit margin 25.95% (yoy-0.20pct, qoq-0.47pct), net profit margin 12.68% (yoy-0.91pct, qoq-1.36pct). In terms of the period cost ratio, 2024Q1 has a period cost ratio of 13.38% /yoy+0.57pct, of which the sales cost ratio is 6.52% /yoy+0.37pct, the management cost ratio is 1.57% /yoy-0.42pct, the R&D cost rate is 4.85% /yoy+0.60pct, and the financial cost ratio is 0.45% /yoy+0.02pct. The company has good cost control during the period, and is committed to investing in R&D, making full efforts to lead the domestic replacement of high-end machine tools.
Balanced development smooths out specific downstream fluctuations, and actively explores overseas markets as one of the leaders in the balanced development of the domestic machine tool industry. Neway has always adhered to a comprehensive product development strategy and balanced development of various products of CNC horizontal lathes, CNC vertical lathes, vertical machining centers, CNC milling and boring machines, and gantry machining centers to diversify the risk of fluctuations in specific downstream industries. According to China Customs data, from January to January 2024, China's metal cutting machine tool export value was US$1.32 billion, up 10.6% year on year, maintaining a trade surplus. In recent years, the company has actively developed overseas markets and sold products to more than 50 countries or regions through the establishment of a dedicated overseas sales network. The company's overseas revenue in '23 was 705 million yuan (yoy +113.0%), and the share of overseas revenue increased from 17.9% in '22 to 30.4% in '23.
The trend of industrial parent machine industry concentration is gradually showing. Machine tool leaders are fully benefiting. According to data from the National Bureau of Statistics, China's metal cutting machine tool production increased 9.3% year-on-year from January to January 2024, and the industry maintained its prosperity. At the beginning of the development of China's machine tool industry, the country was dominated by the “Eighteen Arhats”. Starting from specific needs and painstaking research, private enterprises gradually took over the banner of domestic replacement of high-end machine tools.
We believe that the trend of concentration of leaders in the machine tool industry will accelerate. Neway CNC, as a domestic leader, may fully benefit from the trend of industry concentration, and its revenue growth rate is expected to continue to be higher than the overall growth rate of the industry in the future.
Risk warning: The competitive landscape of the industry worsened beyond expectations; overseas business expansion fell short of expectations.