Incidents:
On April 12, the company released its 2023 annual report: the company achieved revenue of 8.07 billion yuan in 2023, +18.1% year on year, and realized net profit of 82 billion yuan, +40.3% year over year; in 2023Q4, revenue of 2.2 billion yuan, +9.4% year on year, realized net profit of 230 million yuan, +31.5% year over year.
Opinions:
The sharp rise in passenger and commercial prices boosted revenue growth. The revenue of the new business Minsheng Gear was +87.05% year-on-year. The company's revenue in 2023 was +18.1% year over year, mainly due to passenger car gear/commercial vehicle gear business sales volume +11.4%/+19.5% year over year in 2023, and sales price +3.9%/43.3% year over year, achieving a sharp increase in volume and price. By product, sales of new energy gears were +22.9% YoY to 16.57 million units, with revenue +16.5% YoY, improving the overall revenue structure of the gear business and increasing the average price. The company's Minsheng Gear revenue was +87.5% year-on-year, mainly due to strong demand in smart homes, automotive components, etc., and an increase in the company's market share. The Minsheng Gear business is expected to help the company achieve steady and continuous performance growth in the future, supported by the continued high level of downstream prosperity.
The downstream boom has rebounded and fees have been reduced and efficiency has increased profitability. The company's net profit in 2023 was +40.3% year-on-year. There are two main reasons: the first is the recovery in the downstream boom in the commercial vehicle gear/construction machinery gear business combined with the restoration of profitability. The gross margin was +6.5 pct/+3.3 pct year on year, driving the company's overall gross margin +1.2 pct year over year. Second, the effect of reducing fees and increasing efficiency is obvious. The company's expense ratio for the 2023 period was -0.6 pct year on year, of which sales expense rate/ management cost rate/ R&D cost rate/ financial cost ratio -0.01pct/-0.4pct/-0.6pct year-on-year. Thanks to improved technology and increased automation, the company's efficiency per capita was +20% in 2023.
Lay out the robotics business to open up room for growth, and the spin-off and listing of Huandong Technology broadens financing channels. The company lays out the field of robotic precision speed reducers through its subsidiary Environmental Technology, and has formed mature R&D capabilities and batch delivery capabilities. The market share of domestic RV reducers continues to increase, and harmonic reducer products have also been supplied. The company announced a spin-off and listing plan for Huandong Technology in March 2024. While maintaining ownership of Huandong Technology, the company will further broaden its financing channels and focus on business development in the field of robotics, which is expected to open up room for growth for the company.
Profit forecast and investment rating: The company is a leader in the gear industry. The performance of new businesses such as Minsheng Gear can be expected to increase in 2024, opening up room for growth in the field of layout robotics. The company's net profit for 2024-2026 is estimated to be 10.3/12.8/1.55 billion yuan, respectively. The current stock price corresponds to PE of 17.5/14.0/11.6 times, respectively, covered for the first time, giving it a “buy” rating.
Risk warning: The new target falls short of expectations; the commercialization of robots falls short of expectations; the risk of price increases for raw materials; the expansion of new businesses such as Minsheng Gear falls short of expectations; there are errors in the calculation, which is subject to reality.