Matters:

On April 28, 2024, the company released its 2023 annual report: the company achieved revenue of 819 million yuan (YOY -0.47%), gross profit margin of 22.77% (YOY -0.69pct), and net profit to mother of 203.16 million yuan (YOY -64.84%), exceeding the performance forecast limit (performance forecast to mother profit of 14 million yuan to 18 million yuan), after deducting non-net profit of 10.304 million yuan (YOY -83.00%).

At the same time, the company released its 2024 quarterly report: 2024Q1 achieved revenue of 240 million yuan (YoY +52.11%, QoQ +4.70%), gross profit margin of 27.84% (YOY +9.26pct, QoQ +3.57pct), net profit of 22.59 million yuan (same period in '23 - 37.82 million yuan), net profit of 21.95 million yuan (4.513 million yuan for the same period in '23).

Commentary:

Multiple expenses affected 23-year results. After the low point, 24Q1 revenue and profit increased sharply. The revenue-side company achieved operating income of 819 million yuan (YOY -0.47%) in 2023, while the profit side was under pressure, with net profit of 0.2 billion yuan (YOY -64.78%) in 23 years, mainly due to: (1) asset impairment losses & credit impairment losses of 0.19 million yuan; (2) the company's preliminary preparations for business expansion led to increased management costs such as plant leasing, etc., and overseas investment and acquisition projects led to an increase in intermediary service fees; (3) Interest expenses on convertible bonds in 2023 were higher, and exchange gains and losses were generated compared to the same period of the previous year The decrease resulted in an increase of $0.26 billion in financial expenses for 23 years. As the company's mold business volume returned to the growth range, 24Q1 achieved revenue of 240 million yuan (YOY +52.11%), increased operating rate & high gross margin mold business achieved a gross profit margin of 27.84% (YOY +9.26pct, QoQ +3.58pct), and net profit to mother of 0.3 million yuan (same period in '23 - 0.04 billion yuan).

The stamping mold+stamping parts two-wheel drive company has entered the fast track of development. (1) Stamping dies are an indispensable key tool in vehicle manufacturing. In recent years, with the rapid penetration of new energy vehicles, the iteration of new models has accelerated, driving the continuous expansion of the market capacity of stamping dies. Among them, overseas car companies lag behind China in the electrification process, and subsequent development will accelerate, driving the overseas mold market to accelerate. In the field of automotive molds, the company cooperated deeply with overseas customers such as Magna, Lear, and Brose, while actively increasing production capacity in the US and Germany to meet rapidly growing overseas demand. In the context of the rapid development of the overseas mold industry and the expansion of the company's production capacity, the company's automotive mold business is expected to fully benefit from this overseas model cycle. (2) Stamping parts are widely used in automobiles, and the supporting value of bicycles can reach the level of 10,000 yuan. Based on 10,000 yuan per bicycle, the global automotive stamping parts market space in 2022 is 816.3 billion yuan. The company has been deeply involved in the field of automotive stamping parts for more than ten years, and has manufacturing, R&D, product and customer advantages. Tesla is the world's leading NEV company, and the company's deep cooperation with Tesla is expected to follow the rapid development of customers. The company announced in December 2023 that the fixed increase has been successfully completed. With the production capacity of 35 million new sets of stamping parts being implemented, the company's stamping parts are expected to enter a period of rapid growth.

Profit forecasting and investment advice. After more than ten years of intensive cultivation, the company has formed two major segments: stamping dies and stamping parts. Stamping molds benefit from overseas model cycles, and stamping parts are bound by major customers to actively expand production. We forecast that the company will achieve net profit of 1.6/2.6/331 million yuan in 2024-2026. Referring to the valuations of comparable companies such as Ruihu Mold, Tuopu Group, and Xinquan Co., Ltd., considering the high growth of the company's mold & stamping parts business, the company was given a PE valuation of 27 times in 24 years, corresponding to a target price of 24.3 yuan, maintaining a “strong promotion” rating.

Risk warning: Downstream demand falls short of expectations, production expansion falls short of expectations, competitive landscape intensifies, dependence on a single major customer is high, and the gross margin of the mold business falls short of expectations.