2023 and 1Q24 results are in line with our expectations
The company announced 2023 and 1Q24 results: 2023 revenue/net profit/net profit deducted from non-net profit of $1,09/1.03/84 billion, YoY +57.8%/+131.4%/+170.6%; 1Q24 revenue/net profit/net profit net profit net profit of 1.78/0.08/0.07 billion yuan, +50.2%/+60.7% YoY, -56.2%/-78.7% YoY; Company performance is basically in line with our expectations, 1Q24 net profit growth rate year-on-year The low was mainly due to receiving more government subsidies in 1Q23, which led to a higher base.
Development trends
Revenue from the charging business remained high, and 1Q24 gross margin may be hampered by depreciation. The company's charging business revenue in '23 was 651 million yuan, +110% year-on-year. We think it mainly benefited from the high boom in the charging industry+ the company's market share, with a gross profit margin of 27.7% and +12.1ppt year over year. We estimate that it mainly benefited from 1) product structure optimization, increased share of high-margin 30/40kW products, increased overseas revenue contribution, and 2) scale effects and the company's cost reduction and efficiency. 1Q24 We estimate that the charging business revenue was 1-110 million yuan, up about 60% year on year, and maintained good growth. The gross margin was estimated to be 21-22%, maintaining a year-on-year decrease of more than 5ppt. We believe that due to increased industry competition and an impact on gross profit margin, and the company's Xi'an factory was put into operation, 1Q24 revenue did not start, and depreciation and amortization increased. Looking ahead, we believe that 2Q is the industry's traditional peak delivery season, and the company's shipments are expected to start up, and gross margin may benefit from a month-on-month increase in scale efficiency. Looking at the whole year, we expect charging business revenue to maintain 50-60% year-on-year growth in 24, gross margin may decline slightly month-on-month due to market competition, but net interest rates may maintain a good level as scale grows.
The power grid business is growing steadily, and the profitability of the aerospace business is stable. The company's power operation power business achieved revenue of 177 million yuan, +36.9% year-on-year, and +0.3ppt year-on-year. We believe it mainly benefited from the steady growth of the power grid industry and the increase in revenue brought about by automated power distribution products; looking ahead, we expect the power operation power business to maintain about 20% growth in 24 years. The company's aerospace specialty power business achieved revenue of 124 million yuan in '23, -15.4% year-on-year, 52.3% year-on-year, and -0.6ppt. We believe that the year-on-year decline in revenue was mainly affected by the slowdown in industry tendering; looking ahead, we expect the company's new projects to gradually scale up and drive revenue growth in 2024, maintaining a gross margin of 45-50%, driving the company's overall profitability increase.
The impairment of goodwill affected profits, and the expense ratio decreased year-on-year during the period. The company accrued a goodwill impairment of RMB 12 million over 23 years, mainly from its subsidiary Xi'an Howell Power. The company's expense ratio for the 23-year period was 21.5%, compared to -3.6ppt. We believe it was mainly due to cost dilution due to increased revenue.
Profit forecasting and valuation
Considering that the Xi'an factory climbed the slope and increased cost sharing, we lowered the company's 2024/2025 net profit by 9.1%/8.5% to 1.50/219 million yuan, and the target price by 8% to 24 yuan. The current stock price/target price corresponds to 2024/2025 22.5x/15.4x P/E and 27.9x/19.0x P/E, respectively. There is 23.8% upward space to maintain the outperforming industry rating.
risks
The growth of the charging industry fell short of expectations, the progress of overseas trips fell short of expectations, and the risk of impairment of goodwill.