The company released its report for the first quarter of 2024. In 2024, Q1 achieved revenue of 440 million yuan, -0.6% year-on-year, net profit to mother of 32 million yuan, -13% year-on-year, and net profit after deducting non-attributable net profit of 31 million yuan, or -2.1% year-on-year. The company's revenue remains flat and profits are declining. We believe the main reason is that the high-power power supply business is still in a period of climbing capacity, making it difficult to contribute to performance. It is expected that the second quarter may reach a profitable state. The company's performance is basically in line with our expectations. We expect the company to expand its high-power power supply business and build a power platform enterprise.
Sawing business: Steady growth, market share still has room to increase. (1) There is room for an increase in market share: In 2023, the company's bimetallic band saw blade sales accounted for about 35% of the domestic market, ranking first in the country and the top three in the world. However, compared to the market share of leading companies such as Europe, America, and Japan, in the context of the gradual transfer of global production capacity to China, the company, as a leader in China, relies on first-mover advantages, channel advantages, product quality and cost performance advantages, and still has a lot of room for improvement in market share. (2) Product structure upgrade: The company's product structure is continuously optimized, and the proportion of high-end products continues to increase. In 2023, high-end products accounted for 62% of sawing revenue, accounting for +9.6pct. Among them, the share of hard alloy band saw blades increased by 1.6 pct; the proportion of broadband saw blades increased by 2.9 pct. As the product structure is upgraded, the company's profitability is expected to increase further. (3) Collaboration with Metson: The company integrated and empowered Metson in terms of capacity layout, manufacturing capacity, marketing network, supply chain management, and technology research and development. In 2023, Metson achieved revenue of 93 million yuan, an increase of 42.5% over the previous year.
Yada: The manufacturing advantage is obvious, and it is expected that the high-power power supply business will expand. Yada was founded in Hong Kong in 1971 and has a brand history of 50+ years. It was once a wholly-owned subsidiary of Emerson (Emerson), a leading global power supply industry leader. Its customers are widely distributed in the fields of consumer electronics, semiconductor equipment, communications, manufacturing, data centers and medical care. Its main customers include Huawei, Apple, HP, and American Advanced Energy.
(1) Consumer electronics power supplies: The consumer electronics demand side continued to be sluggish in 2023. According to IDC data, global smartphone shipments in 2023 hit the lowest level in 10 years, with a year-on-year decrease of 3.2%. And with the rise of AI, major manufacturers are speeding up the promotion of AI phones, which may become an important driving force for the transformation of the mobile phone industry. The company is based on the big customer strategy. As the industry recovers and major customers launch new products and end inventory clean-up, the company's capacity utilization rate and profit situation are expected to improve.
(2) High-power power supplies: The company relies on Yada's leading domestic power supply manufacturing platform to build a high-power power supply R&D team, actively expand high-power power supply industry opportunities, and build a full range of power supply businesses. With high-power power supplies as an important development direction, the company is vigorously expanding product lines such as photovoltaic inverters, photovoltaic optimizers, energy storage converters, server power modules, household DC charging piles, and fast charging power modules. Based on the construction of AIGC and Huawei computing power centers, the country has ushered in an era of high computing power, and the company's data center power supply business is expected to benefit deeply. Profitability was briefly under pressure due to investment and construction of high-power power supply business production lines, low capacity utilization, and factors such as recruitment of new high-power power supply business employees, investment in R&D, and increased depreciation and amortization of fixed assets.
Currently, the company's on-hand orders are guaranteed. In the future, with the orderly release of production capacity of the company's high-power power supplies and other production lines, and on-hand orders are delivered one after another, the performance of the company's power supply sector will continue to improve.
Investment advice: We expect the company to achieve net profit of 2.2, 3.4, and 410 million yuan in 2024-2026, corresponding PE of 19, 12, and 10X. The company's sawing business is growing steadily, and Yada has excellent manufacturing capabilities. It is expected to build a leading domestic power platform enterprise and maintain a “buy” rating.
Risk warning: The downstream market demand for the sawing business falls short of expectations, and the expansion of the power supply business falls short of expectations.