Recently, the company released the 2023 annual report and the 2024 quarterly report: in 2023, the company achieved revenue of 369,090.49 million yuan, a year-on-year increase of 5.97%, and realized net profit of 20.41719 million yuan; 2024Q1 achieved revenue of 847.6874 million yuan, an increase of 26.91% over the previous year, and achieved net profit of 25.6391 million yuan, an increase of 17.09% over the previous year. The comments are as follows:
Revenue is due to the steady growth of the company's intelligent equipment business: the company's business mainly consists of two major segments, namely the intelligent equipment business and the electric drive business. According to the company's 2023 annual report, the company's intelligent equipment business achieved revenue of 2936.407 million yuan in 2023, an increase of 22.58% over the previous year. The equipment business mainly includes battery/cell intelligent equipment and assembly production lines, intelligent powertrain equipment and assembly production lines, and intelligent vehicle body connection equipment and production lines. Benefiting from the development of the NEV industry, the company's equipment business customers include power batteries (such as Ningde Era, Sunwoda, Guoxuan Hi-Tech, etc.) and complete vehicles (Tesla, BYD, Ideal, NIO, etc.).
The company's equipment business grew from 1,313 billion yuan in 2020 to 2,936 billion yuan in 2023, with a four-year compound growth rate of 30.8%.
Increased competition, depreciation, and refinement of management are putting pressure on profitability: the company's comprehensive gross margin was 12.03% in 2023, down from 17.82% in 2022. Among them, the gross margin of the intelligent equipment business was 14.09%, down from 20.41% in 2022. According to the company's 2023 annual report, the direct labor costs and manufacturing costs of the company's intelligent equipment business increased by 89.55% and 62.02% year-on-year. The company's equipment business is a customized and non-standard business. In recent years, the cost of this business has increased compared to the previous period due to increased project delivery volume and insufficient detailed project management and control. An inventory accrual loss of 207 million yuan in the company's asset impairment in 2023 also led to a decline in the company's profitability. The company's electric drive business revenue in 2023 was 691 million yuan, down 16.17% year on year, and gross margin fell to 2.07%, compared to 9.66% in 2022. It is related to the impact of factors such as the delivery of the company's electric drive products falling short of expectations and increased fixed costs.
2024 operations focus on improving quality: 2024Q1 revenue continued to grow at 26.91%, and the company's gross margin improved marginally in 2024Q1. 2024Q1 was 14.21%, lower than 17.87% in 2023Q1, but better than the gross profit margin of the 2023Q3 quarter, showing an improving trend. According to the company's 2023 annual report, in 2024, the company will implement a development strategy that prioritizes quality over scale. Improve the company's overall profitability through efficiency as the guide and efficiency as the guide. We believe that the company's equipment business has room for refined management and improvement. The electric drive business is expected to achieve scale effects with new customer targets, such as Ideal Auto, Chery Automobile, and Changan Automobile.
The company's profit forecast and valuation: In summary, the company's intelligent equipment business is expected to recover by stabilizing the scale and improving management efficiency, and the electric drive business is expected to benefit from new project volume management improvements. We are optimistic about the company's medium- to long-term development trends. According to our profit forecast for 2024-2026, net profit attributable to mother will be $1.26, 1.85, and 229 million yuan, respectively, corresponding EPS of 0.92, 1.35, and 1.67 yuan, and PE of 22, 15, and 12 times, respectively. Maintain a “Recommended” rating.
Risk warning: Demand in the automotive industry is sluggish, the development of the NEV industry falls short of expectations, the rise in raw material prices exceeds expectations, the promotion of the company's intelligent equipment business falls short of expectations, and the promotion of the company's electric drive business falls short of expectations.