Core views
In 2023, the company's revenue and net profit to mother increased by 17.96% and 34.24% respectively. The profit growth rate was significantly higher than the revenue growth rate, and profitability increased significantly; the annual gross margin was 40.32%, up 4.54 pct year on year, a record high, mainly due to falling raw material prices and optimization of the company's product structure. Looking forward to the future, the company will continue to strengthen R&D and launch more efficient and energy-efficient compressor products. Further optimization of the product structure is expected to drive an increase in the gross margin of the sector, but the gross margin of vacuum products may fluctuate due to declining downstream sentiment and increased competition. 2024Q1 revenue and net profit to mother increased by 8.61% and 25.64%, respectively. The results were in line with expectations. The expense ratio for the period decreased by 3.73 pct year over year to 14.40%. Among them, the decline in financial expenses was clearly mainly due to an increase in exchange earnings.
occurrences
The company released its 2023 annual report. The company achieved annual revenue of 3,852 billion yuan, a year-on-year increase of 17.96%, net profit of 865 million yuan, an increase of 34.24% year on year, 2023Q4 achieved operating income of 946 million yuan, an increase of 1.72% year on year, and net profit to mother of 185 million yuan, an increase of 8.62% year on year.
At the same time, the company released a report for the first quarter of 2024. 2024Q1 achieved revenue of 749 million yuan, an increase of 8.61% year on year, and net profit to mother of 146 million yuan, an increase of 25.64% year on year.
Brief review
All sectors performed well in 2023. The comprehensive gross margin reached a record high, benefiting from the steady increase in demand for downstream refrigeration and commercial central air conditioning, as well as the rapid increase in the scale of production expansion in the photovoltaic industry. The company continued to improve its market competitiveness, and its annual revenue increased by 17.96% year-on-year. By product, with the exception of casting products, which declined in foreign sales revenue due to increased internal supply within the Group, all other products showed significant growth in revenue.
In 2023, the company's compressors (groups), vacuum products, parts and maintenance, and casting products achieved revenue of 19.47, 16.42, 2.12, and 52 million yuan, respectively, up 12.04%, 28.67%, 14.28%, and -22.45% year on year; gross margin was 34.31%, 47.89%, 43.61%, and 12.89%, respectively, up 2.88pct, 5.28pct, 4.42pct, 4.17pct. The annual comprehensive gross margin increased 4.54 pct to 40.32% year-on-year, the highest gross margin performance since listing. We judge that the main reasons for the increase in profit margins include: ① the price of raw materials has declined; ② the product structure continues to be optimized, and the proportion of products with high gross margin has increased. Looking forward to the future, the company will continue to strengthen R&D and launch more efficient and energy-efficient compressor products. The compressor (group) product structure is expected to be further optimized, and gross margin may continue to increase; however, vacuum products are affected by declining downstream sentiment and increased competition, and gross margins may fluctuate.
The company's expense ratio for the 2023 period was 14.42%, up 1.70pct year on year. Among them, sales, management, R&D, and finance expenses were 5.17%, 3.68%, 5.53%, and 0.04%, respectively. The year-on-year ratio was +0.41pct, -0.35pct, +0.28pct, and +1.37pct, respectively. Among them, financial expenses increased significantly, mainly due to an increase in exchange losses compared to 2022, and the rest of the expenses were relatively stable. On the profit side, net profit to mother increased by 34.24% year on year for the year, and the corresponding net profit margin to mother was 22.45%, up 2.72 pct year on year.
2024Q1's performance grew steadily, and profit margins increased year-on-year
2024Q1 revenue and profit increased by 8.61% and 25.64%, respectively, and the results were in line with expectations. Profit is growing rapidly, revenue is growing rapidly, and profitability continues to increase.
2024Q1 gross margin was 37.08%, up 0.23pct year on year. The cost ratio for the period was 14.40%, a significant decrease of 3.73 pct year on year. Among them, sales, management, R&D, and finance expenses were 5.92%, 4.57%, 6.09%, and -2.18%, respectively, and -0.27pct, -0.02pct, and -3.42pct, respectively. Financial expenses dropped significantly, mainly due to an increase in exchange earnings compared to 2023Q1. The net profit margin for 2024Q1 was 19.53%, up 2.65pct year over year.
Investment advice: The company is a leading domestic compressor company. Its compressor (group) products will benefit from domestic economic growth and manufacturing investment for a long time, while vacuum products will grow in line with downstream developments such as photovoltaics and semiconductors. The company is expected to achieve revenue of 42.22, 48.84, and 5.50 billion yuan respectively in 2024-2026, up 9.60%, 15.68%, and 12.60% year-on-year, and net profit to mother of 9.56, 11.41, and 1,308 billion yuan respectively, up 10.48%, 19.40%, and 14.62% year-on-year respectively. Corresponding PE is 11.82, 9.90, and 8.64 times, respectively, maintaining the “buy” rating.
Risk warning: ① The expansion of production in the photovoltaic industry falls short of expectations: Currently, the company's vacuum pump business is mainly used in the photovoltaic industry. Demand is highly linked to the downstream production expansion process. If the boom in the photovoltaic industry cannot be maintained, it will adversely affect the performance of the company's related products. ② Semiconductor customer development is unfavorable: Semiconductor vacuum pumps have development potential and are one of the company's key directions. The company actively cooperates with customers to test and verify new processes. If the verification process is not smooth, it will affect the revenue and profit scale of vacuum pump products. ③ New product development falls short of expectations: The company has many new products under development. If the R&D progress is later than expected, it will not be conducive to the development of the company's products in the market.