Incident: The company released its 2024 quarterly report. In the first quarter of 2024, the company achieved revenue of 863 million yuan, an increase of 22.22% over the previous year; achieved net profit of 125 million yuan, an increase of 73.34% over the previous year; and realized net profit of 125 million yuan without return to mother, an increase of 70.65% over the previous year.
The digital energy business revenue doubled, and the digital maintenance business maintained an advantage. The company's digital energy business revenue continued to grow rapidly. It achieved revenue of 160 million yuan in the first quarter of 2024, an increase of 103.33% over the same period last year. Mainly, the company continued to iterate and innovate in line with changing trends in industry technology; based on outstanding advantages in diagnostic accuracy, wide coverage, and intelligence and ease of use, the digital maintenance business (including comprehensive automotive diagnostic products, TPMS products, ADAS products, etc.) grew steadily, with revenue of 688 million yuan in the first quarter of 2024 compared to the same period last year. This is an 11.61% increase over the same period last year.
Lean management achieved remarkable results. Expenses decreased during the period, and net interest rates increased. The company promoted a significant improvement in profit quality through refined operation management. The company's gross profit margin for the first quarter of 2024 was 56.72%, down 1.67pct from the same period last year; the net profit margin was 13.34%, up 4.35pct from the same period last year. The company's fee control effect was remarkable. The fee rate for the period was 39.71%, down 5.29 pcts from the same period last year.
The sales expense ratio was 14.30%, down 2.50 pct from the same period of the previous year; the management expense ratio was 8.00%, an increase of 0.43 pct over the same period of the previous year; the R&D expense ratio was 16.49%, a decrease of 1.20 pct from the same period of the previous year; and the financial expense ratio was 0.92%, a decrease of 2.02 pct from the same period last year.
Major breakthroughs have been made in overcharging technology. The automotive diagnostic business continues to innovate. The company exhibited 640 kW DC liquid-cooled overcharging piles at CES in the US, with a maximum charging power of 640 kW and a single gun output power of up to 480 kW, setting a new industry record, marking a major breakthrough in the company's overcharging technology.
The flagship supercharging product is equipped with top liquid cooling technology, combined with Daotong's patented AI matrix algorithm, and energy efficiency optimization significantly reduces costs and improves site performance. Through device-level remote monitoring technology, more than 90% of faults can be remotely diagnosed, and more than 60% of faults can be remotely eliminated, reducing overall customer operation and maintenance costs by more than 30%. The automotive diagnostic business continues to innovate. High-voltage battery testing has been upgraded to 45+ brands, 175+ models, and a “VIN/mileage check” function has been added to all equipment products.
Investment advice
We expect the company to achieve revenue of 41.46/51.83/6.281 billion in 2024-2026, up 27.5%/25.0%/21.2% year on year; achieve net profit of 496/6.08/771 million, up 176.9%/22.5%/26.8% year on year; corresponding EPS is 1.10/1.35/1.71, respectively, and corresponding dynamic PE is 23.12/18.87/14.88. Maintain a “Recommended” rating.
Risk warning: Risk of increased competition in the industry; risk of new business progressing less than expected.