Incidents:
On April 29, 2024, Shuanghuan Transmission released its 2024 quarterly report: in Q1 2024, the company achieved revenue of 2,075 billion yuan, +15.8% year over year; net profit to mother was 221 million yuan, +29.4% year over year; net profit after deduction was 210 million yuan, +34.9% year over year.
Investment highlights:
Net profit for Q1 2024 was +29% year-on-year, which was basically the same as the previous month. In 2024, Q1 achieved revenue of 2,075 billion yuan, +15.8% year on year, and net profit of 221 million yuan to mother, +29.4% year on year and -2.5% month on month. Net profit in Q1 2024 grew faster than revenue growth, mainly due to an increase in the company's profitability: 2024 Q1 gross profit margin was 22.65%, +1.88pct year on year; the 2024Q1 period expense ratio was 9.9%, -0.61 pct year on year, of which the financial expense ratio was -0.81 pct year on year, mainly due to a decrease in bank loan interest expenses and a decrease in exchange losses.
The robot reducer product matrix continues to improve, and domestic replacement can be expected in the future. The company's subsidiary, Huandong Technology, is mainly engaged in the production and sale of robot precision speed reducers. With its strong R&D capabilities and batch delivery capabilities, its market share of domestic RV reducers continues to increase. Furthermore, the company continues to enrich and improve its gearbox product line, optimize performance and design innovation. Using the technical and market synergy effects of RV reducer products, the harmonic reducer products of Environmental Technology have been successfully supplied, and actively organized resources to explore and develop precision reducers with new structures. We believe that in the context of localization and high-end development of the domestic robot industry, the company is expected to continue to increase its market share and improve its competitiveness with its product advantages and scale advantages.
Profit forecast and investment rating Considering that the company's robot reducer business is expected to benefit from domestic robot localization, we expect the company to achieve total operating income of 102.46, 124.81, and 14.359 billion yuan in 2024-2026, with year-on-year growth rates of 27%, 22%, and 15%; achieving net profit to mother of 10.19, 12.53, and 1,479 billion yuan; EPS is 1.19, 1.47, and 1.73 yuan. The PE valuations corresponding to the current stock price are 20, 16, and 15%, respectively 14 times, considering the company's continuous deepening field expansion, building a diversified product system, and maintaining an “gain” rating.
Risks suggest that raw material prices continue to rise; sales fall short of expectations; new customer expansion falls short of expectations; production capacity in new factories falls short of expectations; overseas market expansion falls short of expectations; new product development progress falls short of expectations; and mass production of humanoid robots falls short of expectations.