4Q23 and 1Q24 results are in line with market expectations
The company announced 2023 and 1Q24 results: 2023 revenue of 5.897 billion yuan, +23% year over year; net profit to mother was 379 million yuan, +77% year over year, in the performance forecast range of 36-430 million yuan. Corresponding to 4Q23, revenue was 1,742 billion yuan, +12% YoY, +13% month-on-month; net profit to mother was 40.05 million yuan, -60% YoY and -74% month-on-month. 1Q24 achieved revenue of 1,483 billion yuan, +25% YoY and -15% month-on-month; net profit to mother was 68.01 million yuan, -27% YoY and +70% month-on-month.
Development trends
Traditional businesses continue to gain market share, and incremental business injects growth momentum. The company's TPMS, automotive metal fittings, valves and accessories businesses achieved revenue growth rates of 29.4%/6.1%/9.6% respectively in 2023, mainly benefiting from clearing the end of the market. The company further gained market share and provided stable support for performance. The incremental business grew rapidly. The revenue of the air suspension and sensor business continued to increase by 174.8% and 45.2% year-on-year in 2023, mainly due to strong market demand. According to statistics from the Gaiser Research Institute, the air suspension system configuration continued to decline, and the configuration penetration rate increased 6.9% in 2023. We believe that with the volume of ongoing incremental business orders, the company's performance is expected to continue to grow rapidly.
The release of scale effects has led to a decrease in cost rates, and the level of management has progressed steadily. The marketing management and research expenses rate in 2023 was 3.9%/6.4%/8.0% respectively, a total of 18.3%, -0.5pct year on year. The 1Q24 sales management research cost rate was 3.7%/7.6%/8.9%, totaling 20.1%, +1.6 pct year over year, and -0.5 pct month-on-month. It is mainly due to the company's continuous R&D investment intensity, and expenses related to equity incentives increase the management cost rate. Net cash flow from operating activities in 2023 was $438 million, +150% year over year. We believe that the company's three fees are expected to continue to decline as the scale of revenue grows.
The incremental business is full of on-hand orders, and the production capacity layout is expanding globally. Air suspension business: According to the company's official public account platform, the company successively received designations for air suspension components such as ASU, suspension controllers, and air springs in 2024. Sensor business: The company has been designated by high-end global car brands and will supply wheel speed sensors for more than 20 models. Production capacity: According to the company's annual report, the company's new production capacity in Hefei and Shanghai will be put into operation in 2024, and the Hungarian production park will accelerate production capacity construction to further expand the scale and global layout of the sensor and air suspension business. We believe that the scale effect of the company's air suspension business is expected to unleash profitability, and the smooth expansion of the sensor business overseas business is expected to help shape the company's medium- to long-term development curve.
Profit forecasting and valuation
Due to equity incentive costs diluting shareholder returns, we lowered our 2024 net profit by 15.3% to 508 million yuan, and introduced a 2025 profit forecast of 661 million yuan for the first time. The current stock price corresponds to 2024/2025 18.0x/13.9x price-earnings ratio. We maintained our outperforming industry rating and lowered our target price by 15.0% to 65.45 yuan at the same time, corresponding to the 2024/2025 price-earnings ratio of 27.3x/21.1x, with an upward range of 51.6% compared to the current stock price.
risks
Exchange rate fluctuations, international situation risks, raw material price fluctuations, and supply shortage risks.