Description of the event
For the full year of 2023, the company achieved revenue/net profit attributable to mother/ net profit of 38.60/4.51/387 billion yuan, a decrease of 11%/35%/37%; 2023Q4 realized revenue/net profit to mother/ net profit of 9.00/1.17/ 103 million yuan, a decrease of 8%/26%/10%; and 2024Q1 achieved revenue/net profit to mother/ net profit of 7.64/0.43 billion yuan, -12%/-31%/+2% year-on-year.
Incident comments
2023A & 2023Q4: Total revenue in 2023 fell 11% due to pressure from innovative consumer electronics revenue; it is expected that 2023Q4 will continue the 2023Q3 trend, and Q4 automotive electronics revenue growth will accelerate markedly from month to month. By business, revenue from intelligent control components/ innovative consumer electronics/ automotive electronics/ health environment products was +30.5%/-48.4%/+42.8%/+36.8% in 2023, accounting for 34%/30%/13%/10% of revenue. 1) Innovative consumer electronics products: The engraving machine and e-bike business is affected by downstream customers leaving the warehouse. Revenue is expected to decline year-on-year, but improved sequentially in the second half of the year along with inventory removal; the e-cigarette business is expected to decline year-on-year in revenue due to customers switching between old and new products, and is still mainly contributed by plastic components. 2) Intelligent control components: Logitech's related revenue is expected to grow steadily, with Shanghai Hengjing bringing an increase; revenue from water-cooled cooling systems is expected to increase year-on-year. 3) Healthy environment products: The company grasped the pace of rapid repair of orders in the healthy environment industry, and achieved relatively rapid revenue growth. 4) Automotive electronics: Achieve rapid revenue growth, while the company accelerates the global layout of its business. The various 2023Q4 businesses are expected to continue the Q3 trend. Among them, revenue from automotive electronics, water-cooling, and Logitech related businesses is expected to grow and increase sequentially, while revenue from e-cigarettes and e-bikes is still under pressure.
2024Q1: Revenue from the health environment products and e-cigarette business is expected to decline year on year, resulting in a year-on-year decrease in total revenue of 12%, and businesses such as e-bikes and engraving machines to achieve a good year-on-year recovery. In the context of a low base, revenue related to engraving machines is expected to grow rapidly, and the ebike business is expected to see a significant year-on-year increase in revenue. Revenue from the automotive electronics business is growing steadily; revenue from the health and environment business is expected to drop sharply year on year, mainly due to a high base; the e-cigarette business is still disrupted by customer product switching, and revenue is expected to decline year on year.
Changes in exchange earnings affected net interest rates in 2023, and gross margin declined year-on-year in 2023Q4 & 2024Q1 due to changes in product structure.
In 2023, the company's gross margin/net accrued interest rate/deducted non-net interest rate was +0.3/-4.2pcts year over year, and the sales/management/R&D/finance expense ratio was +0.3/+0.8/+2.3 pcts year over year. The financial expense ratio increased due to the fact that restricted stocks did not meet the unlocking conditions and the combined impact of the year-on-year increase in share payment fees and depreciation and amortization expenses in previous years. 2023Q4/2024Q1 companies' gross margin was -1.2/-2.3 pcts, respectively. It is expected to be mainly affected by changes in product structure, and the share of revenue from innovative consumer electronics products with high gross margins will decline; 2024Q1 attributes/deducted non-net interest rates are -1.9/+0.8 pcts, respectively. The difference in changes between the two is mainly due to a decrease in financial management income from transactional financial assets.
It has potential for growth in the medium to long term. We are optimistic about the steady restoration of existing businesses, the gradual expansion of new projects, and progress in ongoing research projects. The company's business focuses on various race segments. Multiple tracks have shown good potential for development. As the company continues to deepen cooperation with major customers and the steady progress of new product development, it is expected to continue to contribute revenue. Downstream customer inventory pressure in the engraving machine business has been relieved, and is expected to continue to improve in the future; e-cigarette products have successfully achieved the supply of “precision plastic parts - core heating module - complete machine”, with downstream customer market development and successful introduction of the company's products, and volume can be expected; the global layout of the automotive electronics business accelerates, and the construction of an intelligent manufacturing base in Mexico is progressing steadily, which is expected to maintain steady growth; other new products and new business development continue to advance, which is expected to contribute to revenue growth in the future. The company is expected to achieve net profit of 6.4/7.4/890 million yuan in 2024-2026, corresponding to PE 18/16/13X.
Risk warning
1. Risk of exchange rate fluctuations; 2. Risk of falling product gross margin.