Incident: The company released its 2023 annual report and 2024 quarterly report. In 2023, it achieved revenue of 790 million yuan, an increase of 32.0% year on year; net profit to mother was 160 million yuan, a decrease of 4.8% year on year. With 2024Q1, the company achieved revenue of 170 million yuan, an increase of 13.2% year on year; net profit to mother was 17 million yuan, a decrease of 28.7% year on year.
In 2023, CNC blades continued to grow, the amount of hardened tools released, and total revenue grew rapidly; product structure changed, and gross margin declined. In 2023, the company's CNC blade revenue increased 22.1% year on year, and the amount of hardened tools was released to 59.47 million yuan. As a result, total revenue grew rapidly. The company's comprehensive gross margin in 2023 was 45.5%, a year-on-year decrease of 3.4 percentage points, mainly due to insufficient scale effect of hardening tools and low gross margin. 2024Q1, the company's comprehensive gross margin was 37.2%, a year-on-year decrease of 8.1 percentage points, mainly due to insufficient capacity utilization for CNC blades and hardening tools.
Equity incentive fees and interest on convertible bonds increased significantly year-on-year. Fee rates increased during 2023, and net interest rates declined. The company's fee rate for the 2023 period was 21.1%, an increase of 3.3 percentage points over the previous year, mainly due to equity incentive expenses and interest on convertible bonds totaling nearly 54.88 million; 2024Q1, the fee rate for the period was 23.8%, a decrease of 2.4 percentage points over the previous year. In 2023, the company's net interest rate was 19.9%, down 7.7 percentage points from the previous year. The net interest rate fell sharply, mainly due to a decrease in gross margin combined with an increase in expenses; in 2024Q1, the company's net interest rate was 10.1%, a decrease of 5.9 percentage points from the previous year, mainly due to a decrease in gross margin.
If the domestic cycle bottoms up, the company will fully benefit; long-term domestic substitutation+overseas expansion, there is plenty of room for growth.
Looking at the short-term inventory cycle from the perspective of the inventory cycle, industrial enterprises began removing inventory in May 2022. In March 2024, the inventory of finished products produced by Chinese industrial enterprises increased 2.5% year-on-year in March 2024, and the bottom was hovering upward. Referring to historical rules, we judge that China's industrial industry is currently at the end of inventory removal and is about to usher in a new inventory replenishment cycle, and the tool industry boom is expected to reverse. In the long run, the domestic CNC blade localization rate is still low, and there is plenty of room for domestic replacement; in addition, the overseas tool market is about 4 times that of the domestic tool market. As a leading domestic tool company, the company focuses on developing overseas markets with product strength and cost performance. Overseas revenue of CNC tools increased 61% year-on-year in 2023, and the incremental contribution to the overseas market is becoming more and more obvious.
Profit forecasting and investment advice. The company's net profit for 2024-2026 is estimated to be 2.0, 2.8 billion yuan, and 360 million yuan respectively. The compound net profit growth rate for the next three years will be 32%, maintaining a “buy” rating.
Risk warning: risk of macroeconomic fluctuations, increased risk of industry competition, risk of fluctuations in raw material prices.