Incidents:
On April 24, 2024, the company released its 2023 annual report and 2024 quarterly report: in 2023, the company achieved operating income of 4.840 billion yuan, +0.59% year on year; net profit to mother was 390 million yuan, +17.80% year on year; 2024Q1 achieved operating income of 743 million yuan, -15.88% year on year, net profit to mother - 121 million yuan, -140.85% year on year.
Opinions:
In 2023, 3C's performance bucked the trend, and 2024Q1's performance was temporarily under pressure due to delivery schedule. In 2023, the company's 3C business achieved steady growth under pressure from the industry as a whole. The total revenue for the year was approximately 3.697 billion yuan, +4.20% year-on-year, accounting for 76.39% of total revenue. The company's advantage in the consumer electronics sector continued to be consolidated.
The 2024Q1 performance is under pressure, mainly due to the early 3C project cycle, preemptive costs, and the equipment has not yet entered the acceptance period. Looking back at the quarterly reports of the past two years, the first quarter accounted for a low share of annual revenue, less than 20%. Short-term pressure on performance did not affect our expectations for the 3C industry's recovery.
Cost control and product structure optimization have achieved results, and profitability has improved. The company's gross profit margin in 2023 was 33.76%, +1.50pct year-on-year. By business, the gross margin of automation equipment (line) /jig and accessories/core components was 33.27%/40.69%/16.73%, respectively, +2.68pct/-5.48pct/-0.22pct; by region, domestic and foreign sales gross margins were 33.05%/35.32%, respectively, +2.09pct/+1.63pct. The increase in gross margin is mainly due to the company maintaining an advantage in the field of automation equipment and reducing procurement costs through fine management. 2024Q1's gross profit margin was 32.66%, -1.91pct year over year, down 1.13pct from 2023.
Deeply focus on 3C and explore fields such as new energy/semiconductor/low altitude economy. In the 3C field, the company deeply binds major customers and focuses on key projects such as flexible modular production lines and MR equipment. At present, this flexible automated production line has been successfully mass-produced, and more than 40 production lines have been delivered to the client, which is progressing smoothly. At the same time, the company has received proofing requests from major customers for second-generation MR production equipment, and is currently in a proofing state. In the field of new energy, there are mainly lithium battery jets, intelligent charging and switching station equipment, automobile automation equipment, etc.
Semiconductor sector: It is a key direction for the company's strategic expansion. During the reporting period, the company launched a new product, Xingwei EH9721, which has now received 400G/800G batch orders from well-known companies in the industry; crystal fixing machines for major customer needs are still in the installation stage; in terms of AOI testing equipment, a new generation of products has been developed. In the field of low altitude economy, the main product is an open space integrated global cruise information sharing system, which provides government and enterprise customers with a large area and large-scale comprehensive solution for normalized global low-altitude inspection.
Profit prediction and investment rating: The 3C business is one of the company's core competencies. Under pressure in the short term, it is expected to continue to grow due to industry recovery and the application promotion of new technologies such as AI. Furthermore, the company's new business expansion in the fields of new energy, semiconductors, and low-altitude economy also provides more possibilities for its performance growth. As the new business gradually matures and market share expands, the company's profitability is expected to further improve. The company's net profit for 2024-2026 is estimated to be 474/5.34/620 million yuan, respectively. The PE corresponding to the current stock price is 21.7x/19.2x/16.6x, respectively, covered for the first time, giving it a “buy” rating.
Risk warning: 1) Global macroeconomic fluctuations increase market uncertainty; 2) increased industry competition may reduce profit margins; 3) rapid technological iteration and high pressure on R&D investment; 4) changes in new energy market policies and subsidies may affect business development; 5) global supply chain fluctuations may affect production and delivery.