2023 and 1Q24 results fell short of our expectations

The company announced 2023 results: achieved revenue of 606 million yuan, +32.74% year on year, net profit to mother of 131 million yuan, +32.26% year over year; 1Q24 achieved revenue of 124 million yuan, +23.5% year over year, net profit to mother of 0.26 million yuan, +28.4% year on year. Overseas expansion fell short of expectations, and performance fell short of our expectations.

The domestic aerospace business doubled, and the share of overseas revenue declined. By industry, in 2023, the company's revenue in aerospace, industry, universities, research and medical care, and other fields was $3.72/1.66/0.39/0.24 billion yuan, +121%/-25%/-1.6%/-10%, and gross margin was 52.43%/47.81%/56.37%/55.97%, respectively. By region, domestic and overseas revenue in 2023 was 4.62/144 million yuan respectively, +60.54%/-14.68% year-on-year. Due to the decline in the share of overseas revenue with high gross margins, the company's overall gross margin declined slightly last year. The increase in the company's performance last year was mainly due to the development of domestic aerospace business.

Development trends

The leading domestic 3D printing equipment company benefits from the expansion potential of the aerospace field. In 2023, the aerospace business increased its share of the company's revenue to 61%, becoming the core driving force for the company's performance growth. 3D printing has significant advantages in integrated manufacturing, special-shaped complex structural parts manufacturing, and high-strength lightweight manufacturing. Flying cars contain a large number of parts, and 3D printing technology has a certain application space in flying cars. According to the company's annual report, the company laid out the low-altitude field five years ago and continued to actively cooperate with well-known international flying car manufacturers. Over the years, it has continuously achieved new results and generated a certain amount of revenue. We expect the company to benefit from the demand for 3D printed parts manufacturing brought about by the domestic low-altitude economy.

Profit forecasting and valuation

As the company's overseas expansion fell short of our expectations, we lowered 2024 net profit by 27.6% to 179 million yuan, and introduced 2025 net profit of 264 million yuan for the first time.

The current stock price corresponds to 58.9 times the 2024 price-earnings ratio and 39.9 times the 2025 price-earnings ratio.

Considering the uncertainty of the company's overseas expansion, we lowered our target price by 21.52 percent, corresponding to 60 times the 2024 target price-earnings ratio and 40 times the 2025 target price-earnings ratio, which has 1.8% upside compared to the current stock price. Considering the company's strong competitiveness in the field of 3D printing equipment, benefiting from the development prospects of flying cars, it maintained a “outperforming industry” rating.

risks

Domestic aerospace business development fell short of expectations; overseas revenue growth fell short of expectations.