Incident: The company disclosed the 2023 annual report and the 2024 first quarter report, and the company's performance increased significantly over the same period last year. The company's revenue in 2023 was 3,861 billion yuan, +3.62% year on year; net profit to mother was 198 million yuan, +27.08% year on year; net profit after deducting non-return to mother was 149 million yuan, +6.81% year over year. The company's revenue for the first quarter of 2024 was 1.02 billion yuan, +37.42% year over year; net profit to mother was 81.17 million yuan, +320.81% year over year; net profit of non-return to mother was 752 million yuan. The company's performance increased significantly year over year.

The SMC segment has a production capacity of 70,000 tons/year, develops next-generation soft magnetic and chip inductor products, and expands its participation in Xiaoxiang Motor's downstream motor business. (1) Four next-generation high-performance soft magnetic composites have been developed: the first KPH-HP, which has been successfully applied to boost inductors for 30-50kW photovoltaic inverters of well-known companies, boost inductors for new energy vehicles, and PFC inductors for inverter air conditioners; the second KSF-HP has been used in batch applications in mining power inductors and 320kW photovoltaic inverter boost inductors; the third KH-HP, the third-generation low-loss iron-nickel soft magnetic material from Dongmu Keda, has been applied in batches in server power supplies; the fourth KAM-HP Used in batches in energy storage projects. (2) Develop chip inductors for a major customer: Achieve sales revenue of 685.357 million yuan in chip inductors and soft magnetic materials for server power supplies in 2023. (3) A new axial flux motor project has been laid out to expand downstream: Ningbo Dongmu Guangtai Company increased its shareholding in Shenzhen Xiaoxiang Electric Company (by the end of the first quarter of 2024, Ningbo Dongmu Guangtai Company held 22% of Shenzhen Xiaoxiang Electric Company's shares), and plans to renovate a site of about 1,000 square meters within the Ningbo factory to set up a special axial magnetic flux motor assembly line.

The MIM sector is improving quarterly, keeping up with the pace of new product launches by major customers. The modules have been validated in the first quarter of 2024 and are expected to contribute to performance growth. The company's MIM revenue increased by about 171.67% year-on-year in the first quarter of 2024. Following the pace of new product launches by major customers, the operating rate of the company's parts production line is expected to continue to increase. The folding machine module line was initially successfully verified, and it is expected to gradually contribute revenue later.

The growth rate of the P&S sector has exceeded expectations, and it is expected to continue to expand with the development of high-end domestic automobiles. Currently, the company's P&S technology platform products are mainly supplied to middle and high-end customers in the automotive industry at home and abroad. In 2023, auto parts sales accounted for 77.94% of the company's P&S main business revenue, reaching 1,539 billion yuan, up 11.45% year on year. Household appliance parts revenue accounted for 17.80% of the company's P&S main business revenue, reaching 352 million yuan, a year-on-year decrease of 3.09%. In the first quarter of 2024, the company's P&S revenue increased by about 31.05% year-on-year.

Profit forecast: With the gradual introduction of new products in the three major sectors of the company, the company's revenue for 2024-2026 is estimated to be 48.59/61.61/7.412 billion yuan, respectively. Net profit attributable to mother was 4.04/5.40/641 million yuan, corresponding to PE21.61/16.17/13.62 times, maintaining the “buy” rating.

Risk warning: the introduction of the company's new products falls short of customer expectations; the volume of the company's folding screen modules falls short of expectations; the development of the folding screen mobile phone industry falls short of expectations