4Q23 and 1Q24 results are in line with market expectations
The company announced 2023 and 1Q24 results: revenue of $5.861 billion in 2023, +13.9% year-on-year; net profit to mother of 654 million yuan, +14.8% year-on-year. Corresponding to 4Q23 revenue of 1,453 million yuan, -3.3%/-5.0% YoY; net profit to mother was 115 million yuan, +37.5%/-42.6% YoY. 1Q24 revenue was 1,589 million yuan, +15.8%/+9.4% YoY; net profit to mother was 195 million yuan, +26.7%/+69.9% YoY. The 4Q23 and 1Q24 results were in line with market expectations.
Development trends
Benefiting from the release of production capacity on the roof and the expansion of overseas markets, the 1Q24 performance was high. The operating revenue of the company's sunboard/headrest/ceiling central controller/ceiling and ceiling system integrated products in 2023 was 3,861 million yuan/1,006 million yuan/503 million yuan/334 million yuan respectively, +5.61%/+29.15%/+21.17%/from scratch. In addition, sales volume of roof central controllers in 2023 was +14.95% to 4.7016 million units. We believe that revenue growth was mainly driven by the increase in the company's new project order volume and the release of ceiling production capacity. In addition, convertible bonds drove the growth in performance. Systems integration products from scratch. Looking ahead, the company's revenue is expected to continue to grow as overseas markets expand and orders for new products increase.
Profitability has been steadily improved, and results in cost reduction and efficiency have been remarkable. The gross margin for 2023 was 27.26%, +4.21ppt; the corresponding 4Q23 gross margin was 24.13%, +11.06pp/ -4.04ppt; 1Q24 gross margin was 27.85%, or +0.33pp/3.72ppt, and gross margin improved month-on-month due to scale effects. In 2023, the company's sales/management/R&D expense ratio was -0.23pp/ -0.20pp/ -0.11ppt to 1.73%/6.41%/3.92% year-on-year, and lean management was further improved. Operating cash flow in 2023 was +155.44% year-on-year to $624 million, and the cash flow performance was impressive.
The high-quality customer base is combined with the advantages of international management, and there is plenty of room for overseas performance growth. The company is a global leader in the field of sun visors. It has production bases in North America and Europe. Its customers cover domestic and foreign car companies such as Porsche, Tesla, Ideal, and Cyrus. Driven by customer demand, production capacity for sunshades and ceilings continues to expand.
The company continues to optimize the global production capacity layout and logistics operation model, and the Mexican base is equipped with the Tesla factory. We believe that after the Mexican base is completed and delivered, overseas business is expected to gain further room for growth.
Profit forecasting and valuation
Due to the expansion of the company's new customers or falling short of expectations, we lowered 2024 net profit of 8.74% to 884 million yuan, and introduced 2025 net profit of 1,020 million yuan. The current stock price corresponds to 16.7 times/14.5 times P/E for 2024/2025.
Maintaining a rating that outperforms the industry, we lowered our target price by 32.94% to 15.29 yuan due to lower profit forecasts and a downward shift in sector valuation center, corresponding to 22.0 times/19.1 times P/E in 2024/2025, with 31.6% upside compared to the current stock price.
risks
The expansion of new products fell short of expectations, and the rise in production capacity fell short of expectations.