Core views:
The company's 24Q1 performance exceeded expectations. According to financial reports, the company achieved total operating revenue of 9.67 billion yuan in 24Q1, +4.9% year-on-year, and realized net profit before and after deduction of 1.04 billion yuan or 9.3 billion yuan respectively, +33.1%/+40.7% year-on-year, and +29.2%/+10.7% month-on-month respectively. The 24Q1 company's performance exceeded expectations, mainly due to the high gross margin of products that confirmed revenue from the coal machine business and the continuous improvement in the operating conditions of the auto parts business during the reporting period. The company achieved gross profit margin of 23.9% in 24Q1, +2.9 pct/+1.3 pct, net profit margin of 12.1%, and +2.7 pct/+3.1 pct, respectively; cost ratio of 10.9%, +0.3 pct/+0.1 pct, respectively.
Coal machine sector: The company's announcement to terminate the split, Hengda Intelligent Control's listing exceeded expectations. The termination of the split will help boost confidence in steady growth in performance, and is expected to lead to an upward shift in the valuation center. The 24Q1 coal machine sector achieved revenue of 4.83 billion yuan, +0.7%/+3.1% year-on-month; realized net profit of 1.01 billion yuan, +31.9%/+48.5% year-on-month. The high increase in the performance of the coal machine sector was mainly due to the high gross margin of products that confirmed revenue during the reporting period.
Auto parts sector: 24Q1 Auto achieved revenue of 4.84 billion yuan, +9.5%/+8.1% year-on-year; of these, 24Q1 ASIMCO achieved revenue of 1.54 billion yuan, +28.1% year over year; 24Q1 SEG achieved revenue of 3.27 billion yuan, +1.4% year over year. The increase in revenue from the automobile business was mainly due to year-on-year increases in sales in the 24Q1 commercial vehicle and passenger car markets. In terms of profit, the auto parts sector achieved net profit of 40 million yuan in 24Q1, +77.5% over the same period last year. Among them, ASIMCO achieved an overall net profit of 170 million yuan, a year-on-year increase of 34.4%, and excellent performance.
Profit forecasting and investment suggestions: The company is an outstanding high-end manufacturing enterprise led by management with a methodology and a focus on medium- to long-term development strategies after further optimization of the governance structure. The growth of coal engines comes from intelligence and socialization, and zero automobile growth comes from new energy sources and (reverse) internationalization. We expect the company's 24-26 EPS to be 2.11/2.39/2.70 yuan/share, maintaining a reasonable value of 26.4 yuan/share and a reasonable value of 22.8 HKD/share for H shares (at an exchange rate of HK$1.08 = 1 RMB). The current stock prices for A/H shares correspond to 7.8/5.2 times the valuation in 24, respectively, and maintain the “buy” rating for A/H shares.
Risk warning: The boom in coal mining is declining; the improvement in the automobile business falls short of expectations, etc.