2023 and 1Q24 results fell short of our expectations
The company announced its 2023 results: revenue of 525 million yuan, +0.52% year on year; net profit to mother of 67 million yuan, -40% year on year; 1Q24 achieved revenue of 121 million yuan, -25.8% year on year, net profit of 0.1 million yuan, -96.6% year over year. Due to the slowdown in capital expenditure in the lithium battery industry and a decrease in equipment orders, the company's 2023 and 1Q24 results were lower than our expectations.
The gross margin of the industry remained stable during the downturn, and the amount of contract debt declined month-on-month. In 2023 and 1Q24, the company's comprehensive gross margin was 57.0% and 55.6%, respectively, up 4.9ppt and 4.3ppt. In 2023, the company's sales expenses rate/management expense ratio/R&D expenses ratio were 14.7%/9.6%/22.4%, respectively, increasing by 3.9 ppt/1.6pp/8.1ppt. The company's net profit margin in 2023 was 12.7%, a year-on-year decrease of 8.5ppt. At the end of the first quarter of 2024, the company's contractual liabilities were 46 million yuan, down from 63 million yuan at the end of the previous quarter, down from month to month.
Development trends
Companies in the slump in the lithium battery equipment industry are increasing investment in R&D and reserving new products for a new round of rise. In 2023, the company invested 117 million yuan in R&D, an increase of 57.55% over the previous year, accounting for 22.36% of current revenue. The company continued to increase investment in R&D during the downward cycle of the industry. In the field of new products: 1) Semiconductors: The company achieved batch shipments of power semiconductor welding equipment during the reporting period, while increasing R&D investment in the semiconductor field. In addition to ultrasonic terminal welding machines and ultrasonic pin welding machines, the company successively launched equipment such as ultrasonic bonding machines and ultrasonic scanning microscopes to form an overall ultrasonic application solution. 2) In the field of new energy, the company's edge roller welders and ultrasonic roller welders used in composite fluid collection welding have received small-batch orders; 3) Others: The company's welding quality monitoring system has received small-batch orders; the ultrasonic dust removal equipment launched by the company has been designated by customers.
Profit forecasting and valuation
Due to the downturn in the lithium battery equipment industry, the release of new products fell short of expectations. We lowered our 2024 net profit by 45% to 110 million yuan, and introduced a new net profit of 168 million yuan in 2025 for the first time.
The current stock price corresponds to 50 times the 2024 price-earnings ratio and 32.9 times the 2025 price-earnings ratio. Since lithium battery equipment is in a downward cycle and the volume of new products is uncertain, we lowered the target price by 31% to 65 yuan, which corresponds to 45 times the price-earnings ratio of 2025. There is 35% room for growth compared to the current stock price. Considering that the company has more room for ultrasonic applications in the field of composite fluid collectors and semiconductors, the company has a stable competitive position and maintains a “outperforming industry” rating.
risks
The decline in the main lithium battery equipment industry exceeded expectations; the release of new products fell short of expectations.