Incident: The company released its 2024 quarterly report. In the first quarter, it achieved operating income of 2,075 billion yuan, an increase of 15.8% over the previous year; net profit attributable to shareholders of listed companies was about 221 million yuan, an increase of 29.4% year on year; net profit after deducting non-return to mother was about 210 million yuan, an increase of 34.9% year on year. The results are in line with expectations and are in line with expectations.

The 24Q1 performance was in line with expectations, and the passenger car gear and consumer gear business contributed major increases. In the 24Q1 quarter, the company achieved revenue of 2,075 billion yuan, +15.8%/-5.8%; net profit to mother of 221 million yuan, +29.4%/-2.5% year over month; net profit after deducting non-return to mother of 210 million yuan, +34.9%/-17.2% year on month. Looking at specific business segments, the NEV passenger car gear business is expected to contribute a major increase. During the reporting period, the company obtained new energy vehicle electric drive gear and small assembly projects, including Toyota and well-known European luxury brand car companies; targeted projects have entered mass production in stages to ensure the continued growth of the company's passenger car gear business. Sanduole Minsheng's gear business continues to achieve business integration and market development, and its share in the smart home and automotive sectors continues to increase. Looking ahead to the whole year, many of the company's businesses will continue to grow in 2024, and the overall performance is highly certain.

Efforts to reduce costs and increase efficiency continued to be carried out effectively, and the cost level dropped sharply from month to month. The 24Q1 company achieved a gross profit margin of 22.7%, +1.9pct compared to the same period; achieved a net profit margin of 10.7%, +1.1pct/+0.4pct compared to the same period; achieved a net interest rate of 10.1% without return to mother, +1.4pct/-1.4pct compared to the same period last year. Profitability continued to increase year-on-year. In terms of cost rates, the 24Q1 company's expense ratio was 9.9%, -0.6pct/-2.2pct, with sales, management, R&D, and financial expenses rates of 0.9%/3.7%/4.8%/0.5%, respectively, +0.0pct/-0.5pct/+0.7pct/-0.8pct, and -0.3pct/-1.2pct/-0.7pct/-0.0pct month-on-month. The company continues to promote internal process innovation, significantly reducing costs and increasing efficiency, further contributing to performance growth.

Looking forward to the future, we are optimistic about the company's multi-dimensional growth in terms of globalization, livelihood gear, and robotics as a precision gear platform company. In terms of globalization, in 24, the company will ensure that the construction of the Hungarian production base progresses as scheduled, laying a solid foundation for global market expansion. In the field of minsheng gears, the company actively invests in the research and development of injection-molded gears and small assemblies, and its share in the fields of smart homes and vehicle parts has increased one after another. In particular, the market share in the sweeper industry has grown rapidly, contributing to new volume. In the field of robotics, the subsidiary Environmental Technology continues to increase its market share of domestic RV reducers, successfully supplied harmonic speed reducers, and explored and developed precision speed reducers with new structures, laying a solid foundation to meet the diverse needs of future robots for joints.

Maintain profit forecasts and maintain a “buy” rating. As a precision gear manufacturing platform enterprise, the gear business has formed a strong competitive advantage. AMT for new energy vehicles and heavy trucks continues to grow, and has been expanding the global market for a long time, contributing to increased performance; the RV reducer market in the robotics field leads the market, and is still one of the few speed reducer suppliers that can directly connect with customers and grow together in the field of humanoid robots. We expect the company to achieve net profit of 10.39/13.04/1,534 billion yuan in 2024-2026, a year-on-year growth rate of 27.2%/25.6%/17.6%, corresponding to the current PE of 20x/16x/13x, maintaining a “buy” rating.

Core risks: downstream automobile sales fall short of expectations, robot industry development falls short of expectations, and uncertainty about the spin-off of Environmental Technology.