Core views:

24Q1 results are in line with expectations. The company released its annual report for '23 and its quarterly report for '24, and the results were in line with expectations. The company achieved revenue of 1.57 billion yuan in 23Q4, an increase of 23% over the previous year, and realized net profit of 570 million yuan to mother, an increase of 51% over the previous year. 24Q1 achieved revenue of 1.45 billion yuan, an increase of 11.5% year on year; realized net profit of 30 billion yuan to mother, a decrease of 5.4% year on year. The 24Q1 revenue side was in line with expectations. Overseas shipments maintained a high level of prosperity when production capacity growth was not obvious; the profit side declined year-on-year, with non-recurring profit and loss of 100 million yuan from the core investment side. The profit after restoration was around 400 million yuan, an increase of more than 25% over the previous year, achieving considerable growth.

There is a high increase in overseas arm products, and profit margins have been further optimized. In '23, the company achieved overseas revenue of 3.84 billion yuan, an increase of 13.4% over the previous year. Overseas arm revenue grew by more than 140% in '23. The total revenue of the overseas arm arm type is close to 50%, the share of the total revenue of the pull-arm arm type has increased to 40%, and the gross margin of arm products in '23 increased by nearly 10pct compared to '22, and there is still room for improvement in the future. The company's gross margin for both 23Q4 and 24Q1 was around 41%, an increase of nearly 4pct over the same period. The core reason is the optimization of the product structure, the new spectrum and the increase in the proportion of high value-added products.

The Phase 5 plant began contributing production capacity. According to the annual report, the company's Phase 5 plant has already entered the trial production stage and is expected to gradually contribute to the increase in production capacity starting in '24; the revenue of the Phase 6 plant is estimated to be 2.5 billion yuan, the number of units is 20,000 units, and the calculated average price is 122,500 yuan/unit. New energy scissors account for or higher. The company empowers scissor products to go overseas, and ushered in iterative evolution in terms of model or design. Increased production capacity over the next few years will fuel the company's overseas growth.

Profit forecasting and investment advice. Dingli is already a strong export growth stock, and overseas market performance continues to be achieved. The company's net profit from 24 to 26 is estimated to be 21.7/25.9/3.24 billion yuan. Referring to comparable company valuations, the company is given 18 times PE in 24 years, corresponding to a reasonable value of 77.22 yuan/share, maintaining a “buy” rating.

Risk warning. The risk of domestic market growth falling short of expectations; the risk of increased competition in the domestic market; the risk of overseas market expansion falling short of expectations; the risk of production capacity expansion of leading overseas companies.