Incident Overview
The company released its 2023 annual report and 2024 quarterly report. In 2023, the company achieved revenue of 794 million yuan, +32.02% year on year; net profit to mother of 158 million yuan, -4.85% year on year; net profit after deduction of 153 million yuan, -3.20% year on year. Among them, 23Q4 achieved revenue of 207 million yuan, +3.67% year on year, and net profit of 52 million yuan, or -11.33% year on year. In 2024Q1, the company achieved revenue of 170 million yuan, +13.24% year on year, and net profit to mother of 17 million yuan, -28.69% year over year.
23. Revenue increased significantly throughout the year, and profits declined slightly due to higher costs and expenses. 1) On the revenue side, against the backdrop of weak overall demand in the industry in '23, the company's revenue achieved a high growth rate of 32.02%. The main reason was that the company achieved a double increase in volume and price after the high-end CNC blade project was put into operation, which combined with the overall tool production contributed to a considerable increase in revenue. Specifically: a) CNC blades achieved annual revenue of 722 million yuan, +22.07% year over year, of which shipment volume was 103 million pieces, with an average price of 7.01 yuan/piece, with an average price of 7.01 yuan/piece, with a clear trend of increasing volume and price; b) Overall tools achieved revenue of 59 million yuan, +949.84% year over year, of which 726,300 units were shipped, with an average price of about 81.88 yuan/piece, -8.36% year over year; 2) Profit side, the company's consolidated gross profit margin for 23 years The net interest rate was 45.47%/19.88%, respectively, -3.38/ -7.70pct, respectively. The main reasons: a) The overall tool was in the production capacity climbing stage, and the total fixed cost amount was large. The gross margin of the overall tool in '23 was only 2.8%, and the increase in revenue share dragged down the overall gross profit margin in the short term; b) Increased equity incentive share payment expenses of about 27.966,800 yuan; c) Increased interest expenses on convertible bonds, totaling about 26.914,800 yuan; reflected in 3) the cost side, the fee rate for the 2023 period was 21.14% + 3.32pct, of which the sales/management/R&D/finance expense ratios were +1.67/-0.57/+0.76/+1.47pct, respectively.
Revenue continued to grow well in 24Q1, and scale effects and rising average prices are expected to drive profit improvements.
The 24Q1 company achieved revenue of 170 million yuan, +13.24% year over year, gross profit margin of 37.24%, and -8.08pct year over year. We think it may be due to: first, the increase in overall tool product revenue share with low gross margin, which dragged down the comprehensive gross profit margin; second, the Spring Festival holiday was extended compared to the same period in previous years, and short-term costs increased due to insufficient CNC blade operating rate. We believe that with the recovery of downstream demand, the capacity utilization rate of CNC blades and overall tools is expected to pick up, combined with price increases for superimposed products and an increase in the share of high-end products, and overall profitability is expected to gradually improve in the future.
Continuing to develop internal and external markets, we can expect an increase in product volume and price increase in export sales ratio in the future. In 24, the company will continue to improve channel construction to increase market development, and carry out dealer layout plans around large industrial clusters to further meet the needs of end customers; improve the layout of overseas distributors and raise awareness of products overseas. At the same time, the expansion of major overseas direct sales customers can also be expected. In '23, the company's overseas revenue accounted for about 5.92%, and overseas gross margin was about 9.31 pct higher than domestic gross margin. We believe that increasing the share of high-margin export sales is important for the company's medium- to long-term revenue and profit growth, brand awareness and reputation, and improvement in competitive position driving effect. In terms of production capacity, the company's high-end CNC blade project was put into operation in April 23 and fully released in '24. Production capacity release combined with an increase in the share of high-end products, and the trend of rising blade business volume and price may continue. Furthermore, the overall tool production capacity of IPOs and convertible bond projects continues to rise. We believe that as the peak consumption season in the 3C sector approaches, overall tool sales are expected to grow at a high level.
Investment advice
We expect the company to achieve operating income of 1,05/12.15/1,391 billion yuan from 2024 to 2026, +26.53% /+ 20.87%/+14.49%; realized net profit to mother of 1.97/2.71/334 million yuan, +24.71%/+37.85%/+23.18%. The current stock price corresponds to PE19/14/11 times PE, maintaining a “buy” rating.
Risk warning
Market competition increases risk; downstream market demand falls short of expectations, etc.