1Q24 results are in line with our expectations
The company announced 1Q24 results: achieved revenue of 863 million yuan, +22.2%/-18.7% YoY, realized net profit of 125 million yuan, +73.3% YoY, turning loss into profit month-on-month; deducting non-net profit of 125 million yuan, +70.7%/+26.1% YoY. The results were in line with our expectations.
Development trends
The traditional business is expanding steadily, and the charging pile business has entered a harvest period. By business, 1Q24's traditional main business (including comprehensive automotive diagnostic products, TPMS products, ADAS products, etc.) had revenue of 688 million yuan, +11.6% year-on-year, maintaining steady growth; the charging pile business had revenue of 160 million yuan, an increase of +103.3% year over year, entering a period of rapid expansion. Looking ahead, we expect the traditional business to maintain a steady growth trend. At the same time, we are optimistic that the gradual delivery of orders from key leading customers in the European and American markets will drive the charging pile business to maintain high growth, and charging cloud services are expected to contribute additional growth.
Profitability is improving steadily, and the gross margin of the charging pile business is expected to continue to improve. The gross profit margin for 1Q24 was 56.7%, -1.7pp/+0.4ppt compared to the same period, and the gross margin increased steadily; the net profit margin was 14.5%, +4.3pp/ +22.7ppt compared to the same period. The increase over the same period was mainly due to a low base due to factors such as litigation compensation, settlements, and deferred income tax accruals. The cost side was relatively stable, and the cost rate was -5.3pp/+1.0ppt compared to the previous month during the 1Q24 period. According to the company's announcement, due to the high R&D and sales expenses of the charging pile business in the early stages, as well as the impact of tariffs and air freight costs, the charging pile business still lost money in 2023; in 2024, factories in Vietnam and North America were put into operation to avoid tariff costs, and the company further optimized logistics control. The company expects that the gross margin of the charging pile business will have good room to improve.
Products, production capacity, and customers are fully rolled out to embrace the ocean of stars in the overseas charging pile market. Product: Launch three hardware products: high-power supercharging pile (640KW/liquid cooling/400KM charge for 10 minutes), small DC pile (40KW/130 KM charge for 30 minutes), commercial AC pile (19.2KW), and charging cloud platform (operation, operation and maintenance, APP application) software to provide a full range of solutions. Customers: The 2B side has signed new contracts with many of the world's top 50 enterprise customers in North America and Europe, and has targeted several strategic major customers in Asia/Southeast Asia. The 2C e-commerce direct sales charging stations have reached tens of thousands, and breakthroughs have been made in online channels. Production capacity: While ensuring AC charging pile production capacity, the Vietnamese production base added DC charging pile production capacity. The North Carolina plant in the US will be put into operation by the end of 2023, providing a guarantee for long-term development.
Profit forecasting and valuation
We maintain our 2024/2025 earnings forecast. The current stock price corresponds to 2024/2025 26.3/18.3xP/E. Maintaining an outperforming industry rating, maintaining a target price of 32.12 yuan, corresponding to 32.1/22.3x P/E in 2024/2025, with 22.0% upside compared to the current stock price.
risks
The international trade situation worsened; exchange rate fluctuation risk; geopolitical risk; industry competition intensified.