Q1 performance exceeded market expectations: 24Q1 revenue of 2.5 billion yuan, +8%/-9% year on month; net profit to mother of 310 million yuan, +28%/-24% year on month, net profit of 295 million yuan after deducting non-return net profit of 295 million yuan, +27%/-24% year on month.

Q1 gross profit margin was 22%, +0.04pct/-2.1pct; net profit margin to mother was 12.3%, +1.9/-2.5pct month-on-month; net interest rate without return to mother was 11.8%, +1.8/-2.3 pct month-on-month, exceeding market expectations.

Q1 revenue is in line with expectations, and we expect to maintain 25% + growth throughout the year. Q1 revenue was 2.5 billion yuan, +8%/-9%, in line with market expectations. The company's production capacity utilization rate in April has reached 70% +. We expect the operating rate to further increase to 80% in May. Q2 revenue can be increased by 40% month-on-month, 30% +, and revenue for the full year of 24 is expected to be 14 billion yuan, an increase of 33%. Among them, overseas we are expected to contribute 800 to 900 million yuan in revenue, an increase of 50% +. In addition, the company lays out harmonic speed reducers in the robotics field to expand the second growth curve. We expect production capacity to be put into operation in 25 years, gradually contributing to profits.

Q1 Profitability exceeded expectations, and gross margin increased slightly year over year. Q1 The company's gross profit margin was 22%, +0.04pct/-2.1pct compared to the same period last month. Under the Spring Festival holiday and price reduction pressure, profit remained flat year on year, exceeding market expectations. The net interest rate for Q1 was 12.3%, and the VAT refund increased profit by about 40 million yuan. If deducted, Q1 net profit to mother was 270 million, and the net interest rate to mother was 10.8%, which was still better than expected. The company continued to reduce costs and efficiency to offset the impact of the price reduction, and Q1 showed a marked reduction in overseas losses. The company has a significant profit advantage over second-tier profits. There is less room for subsequent price cuts, and the company's manufacturing side continues to improve efficiency and reduce fees, optimize product structure, dilute costs due to scale effects, and reduce losses in overseas factories. We expect the net interest rate to be maintained at 10% + in 24 years.

Expense ratios declined month-on-month, and net operating cash flow increased significantly year-on-year. Expenses for the Q1 period were 230 million yuan, +10% year on month, up -25.3% month on month, cost rate of 9%, and +0.1/-2.0pct month on month, of which R&D expenses were 132 million, R&D expenses rate 5.3%, and +0.7/-2.1pct year over month. Q1 The company's inventory was $82 billion, down 11% from the beginning of the year; contract liabilities were $190 million, down 7.4% from the beginning of the year. Q1 Net operating cash flow was $230 million, +1175% year over year, mainly due to increased repayment and government subsidies; net cash flow from investment - $280 million, down 62% year on year; capital expenditure of 432 million yuan, down 41% year on year; monetary capital was 1.6 billion yuan, down 16% from the beginning of the year.

Profit forecast and investment rating: Considering the company's steady profit, we maintained the 2024-2026 net profit estimate of 14.5/18.3/2.24 billion, +20%/26%/23%, corresponding to PE17x/13x/11x. The company is the leader in structural components and gave 25xPE in 2024, corresponding to a target price of 134 yuan, maintaining a “buy” rating.

Risk warning: Fluctuating raw material prices and market competition increase risk.