2023 Annual Report Performance: Annual revenue of 6.312 billion yuan, +16% year on year; net profit to mother of 1,867 billion yuan, +48.5% year on year; gross profit margin 38.5%, +7.5 pct year on year; net profit margin 29.6%, +6.5 pct year on year.
23Q4 performance: Revenue of 1.57 billion, +22.9% YoY, -4.5% month-on-month; net profit to mother of $570 million, +50.6% YoY, -24% month-on-month; gross profit margin 41%, +4pct YoY, -2.9pct month-on-month; net profit margin 36.5%, +6.7pct YoY, +8.4pct month-on-month.
24Q1 performance: revenue of 1.45 billion, +11.5% YoY, -7.5%; net profit to mother of 302 million, -5.4% YoY, -47.4% month-on-month; gross profit margin 41.1%, +3.5pct YoY, +0.14pct month-on-month; net profit margin 20.8%, -3.7pct yoy, -15.72pct month-on-month.
The results of the annual report are in line with expectations, as previously announced. The main driving force behind the company's 23 year performance growth was the smooth promotion of overseas arm style, with revenue of 2.45 billion yuan in '23, +68% over the same period. Overseas accounts for 47%, and is expected to account for more than 50% in 24. Revenue from scissors in '23 was 3.01 billion yuan, -8.6% year-on-year. The main reason for the decline was the increase in CMEC's shareholding ratio in Q4. Some export products needed to be offset by internal related transactions and included in issued goods rather than revenue, so revenue recognition was delayed. Mast revenue in '23 was 504 million yuan, +5.2% year-on-year.
The Q1 performance fell short of market expectations and was mainly affected by changes in the fair value of Hongxin C&D shares held. On the revenue side, 1) 24Q1 added less production capacity, and production capacity was limited; 2) Domestic sales were low, and production was affected by the holidays; 3) CMEC's shareholding ratio increased, and revenue was confirmed late (same as Q4), and corresponding contract liabilities increased significantly, at 196 million at the end of Q1 and 125 million at the end of 23; on the profit side, Hongxin C&D shares held by the company lost 102 million (corresponding to changes in fair value). If this effect is deducted, the company's Q1 net profit was 4.04 billion, +26.6% compared to the same period last year. Interest rate 27.8%, YoY + 3.26pct.
The gross margin continues to rise sharply, mainly due to: 1) the company's cost control, lean production and management; 2) the reduction in raw material costs; 3) the overseas share of the arm type plus the increase in the share of electric power, and the increase in the gross margin of the arm itself. By product structure, the gross margins of arm type, scissor fork, and mast type were 30.52%, 40.28%, and 43.46%, respectively, +9.88pct, 7.65pct, and 9.49pct, respectively. By market area, overseas gross margin was 41.65% in '23, +7.97pct year on year, and domestic gross profit margin was 27.30%, +5.72pct year on year.
Exports: 60.84% in '23, slightly lower than '22 (62.22%). Europe and the US accounted for 75% of exports, and other markets 25%.
The fee rate was well controlled, and the exchange gain was $105 million. The company's sales/management/R&D expenses ratio was 3.68%/2.24%/3.49%, +0.79pct/-0.03pct/-0.23pct, financial expenses ratio -3.88%, +0.39pct year on year, of which exchange revenue was 105 million yuan, and exchange revenue in '22 was 197 million yuan.
Maintain a “Highly Recommended” investment rating. Demand from overseas markets is strong, and the extender arm has been highly recognized by overseas customers. It is expected to open up space in overseas markets. At the same time, the gross margin of the company's products will increase, and overall profitability will improve. We expect the company to achieve operating income of 75.4/87.3/9.9 billion yuan in 24/25/26, an increase of 19%/16%/14% year on year, and net profit of 20.7/22.9/2.62 billion yuan, up 11%/14% year on year, corresponding PE of 15/14/12 times. The valuation is still low and maintains a highly recommended rating.
Risk warning: Raw material prices are rising, overseas demand is falling, and market competition is intensifying.