Core views:
Hongya CNC disclosed its annual report for '23 and its quarterly report for '24. In 2023, revenue was about 2,683 billion yuan, up 26.09% year on year; net profit to mother was about 590 million yuan, up 29.75% year on year.
Among them, 23Q4's revenue was 635 million yuan, up 18.75% year on year; net profit to mother was 111 million yuan, up 60.27% year on year. Revenue for the first quarter of 2024 was about 690 million yuan, up 17.28% year on year; net profit to mother was about 142 million yuan, up 15.36% year on year.
CNC drills contributed a large increase, and gross margin increased in all categories. Revenue from edge banding machines, CNC drills (including multi-row drills), machining centers, and CNC panel saws in '23 was 1,099/5.53/4.04/283 million yuan, respectively, +26.07%/+42.68%/+15.46%/+24.77%; corresponding gross margins were 43.61%/28.43%/23.60%/27.57%, respectively, up 1.82/5.88/4.52/5.42 pcts year-on-year.
Cost control is good, and the results of increasing R&D investment have been remarkable. The expense ratio for the 23-year period was 5.10%, down 1.45pct year on year, and further reduced to 4.79% in the first quarter of '24. Among them, sales expenses and financial expenses were drastically reduced. R&D expenses were 98.65 million yuan in '23, an increase of 21.31% over the previous year. The company launched the first domestic maglev high-speed flexible edge banding machine in 23, with a maximum edge banding speed of 42m/min, leading the world in technical level.
The new base has been completed and put into trial operation, and production capacity is expected to be gradually released. According to the annual report for the year 23, the Guangzhou edge banding machine manufacturing base and the Foshan CNC equipment manufacturing base have been put into trial operation in November 2023 and January 2024 respectively. The two bases have introduced advanced automated laser cutting lines, gantry milling processing centers, fully automatic bending machines, robot welding centers, etc., to rapidly improve the manufacturing level.
Profit forecast and investment advice: The company's net profit for 24-26 is estimated to be RMB 716/8.69/ RMB 1,055 million, respectively. Considering that the company's new base has been put into trial operation, the company was given a PE valuation of 15 times the net profit due to mother in 24 years, corresponding to a reasonable value of 25.30 yuan/share, maintaining a “buy” rating.
Risk warning: Technology research and development fell short of expectations; gross margin declined due to fierce industry competition; insufficient production capacity release; downstream boom recovery was unsustainable.