Key points of investment:
Incident: Revenue of $2,543 million in 2023 (-14% YoY), net profit attributable to mother of $140 million (-43% YoY), or less $126 million (-46% YoY). 23Q4 revenue was $627 million (-25% YoY), net profit attributable to mother was $56 million (-35% YoY), or less than $46 million (-39% YoY). 24Q1 revenue was $608 million (-6% YoY), net profit attributable to mother was $06 billion (-80% YoY), or less than $0.04 billion (-87% YoY).
Revenue fell slightly short of expectations and was hampered by supply chain abandonment. In the second half of 2023, the overseas market supply chain was in the inventory removal stage. Overseas annual revenue was 1,084 billion yuan, of which only 479 million yuan in the second half of the year was only 479 million yuan, a year-on-year decrease of 34.6%. By industry: The overall demand for automation is relatively stable. The increase comes from photovoltaics/lithium batteries/semiconductors (+22% YoY), smart cars, and autonomous driving/lidar (+35% YoY).
Revenue from power and lighting system control, equipment condition management systems, and trade agency businesses all fell by more than 20% year on year. Looking forward to the future: Industrial motor orders were placed about a quarter in advance. Beginning in the second half of '23, various industry segments are in a phase of recovery in demand. Orders are expected to increase year over year. The 24Q1 revenue growth rate picked up, and the subsequent entry into the inventory cycle at home and abroad will be the core driving force for the company's performance recovery.
Gross profit control continues to improve, and investment is increasing based on research and development. Gross profit side: 37.2% in 2023 (-1.0pct year on year), 38.7% in 23Q4, and 38.1% in 24Q1, all higher than in the first three quarters of 2023, and gross profit control capabilities continue to improve. Profit side: Net interest rate of 5.6% for 23 years. The company achieved effective control over management and sales expenses. R&D investment continued to increase, with R&D expenses of 0.24 million yuan, an increase of 9% over the previous year.
The net interest rate for 24Q1 was 1.1%, mainly affected by asset impairment losses of about 20 million. Overseas customers are experiencing strong short-term storage demand due to supply chain anxiety. The company has increased the purchase volume of scarce raw materials such as bulk raw materials and key components, but actual order demand may be cancelled or delayed, and the inventory price drop is preparing to rise.
The production capacity layout continues to advance, and the field of robotics is poised to advance. Following the “project to produce 4 million hybrid stepper motors per year”, the company added a “new production capacity project for control motors and drive control products” at the Mingzhi Vietnam plant in February 2024 to strengthen overseas product production and component support capabilities, meet customer needs in the international market, avoid possible trade risks, and consolidate the company's competitiveness and service capabilities in the global market. In the field of robotics, the company's products such as brushless motor modules, coreless hollow cup motor modules, frameless and AC servo motors and drive and control systems, precision screw transmission modules, hub/wheel side motor modules, and rotating/lifting mechanism modules are widely used. The company and its subsidiaries Narushi Yasuura, AMP of the United States, LIN of the United States, T Motion of Switzerland, Minzhi Paiboss, and Changzhou Transportation Control are all actively deployed in the field of robotics applications, and have competitive advantages in technology, commerce, and mass production.
Profit forecast and investment advice: The basic market of the company's main business improved marginally with economic recovery, and the hollow cup motor business opened up long-term value space with humanoid robots. Considering the weak short-term recovery momentum and the company accrued a lot of depreciation in the first quarter, we expect net profit to be 1.9/2.6/360 million yuan in 2024-2026 (the previous value was 25/380 million yuan in 24-25 years), corresponding to the PE valuation 132/93/68 times the current stock price, maintaining the company's “holding” rating.
Risk warning
The degree of commercialization of humanoid robots falls short of expectations; risk of fluctuating demand in downstream markets; risk of deteriorating international trade environment; risk of production capacity release falling short of expectations.