The company released its 2023 annual report & 2024 quarterly report. In 2023, the company achieved revenue of 487 million yuan (+1.32%), realized net profit of 130 million yuan (+16.35%), and net profit after deducting non-return to mother was 105 million yuan (-2.24%). 2024Q1 achieved revenue of 100 million yuan (-12.24%) and realized net profit of 18.178 million yuan (-61.76%) to mother.
The macroeconomic pressure in 2023 was high, and the company faced the challenges of fluctuating market demand and increased competition. By business, the company's industrial control/automobile/new energy connector business achieved revenue of 2.7/122 billion yuan in 2023, which was -14.2%/+39.9%/+23.0% year-on-year respectively. The decline in the industrial control business is mainly due to leading customers introducing new suppliers in the context of high price reduction pressure, slowing down the pace of demand for new projects and new customers under economic pressure, and delays in orders due to delays in projects of newly developed strategic customers such as Siemens and Panasonic. Looking at the subregions, domestic and overseas revenue growth rates of the main business were +6.45% and -12.77%, respectively. In the 23Q4 quarter, the company achieved revenue of 119 million yuan (-3.84%) and realized net profit of 29 million yuan (-3.93%) to mother.
Overall gross margin declined by 1.24 pct year on year in 2023, mainly due to the decline in gross margin of the automobile and new energy business, which fell by 1.72/10.18 pct year on year, respectively. The obvious decline in gross margin of the new energy business is mainly due to an increase in the share of products with wiring harnesses with low gross margins. The sum of the four major cost rates is relatively stable.
The decline in 24Q1's revenue was mainly due to growing pressure from industrial demand and price pressure from downstream customers. The 24Q1 gross profit margin was 37.06%, down 4.80 pcts year on year and 6.52 pct month on month. The decline in gross margin was affected by the double pressure of rising prices of raw materials such as upstream gold and copper, as well as fierce competition in product prices. Looking ahead to 24Q2, the company's plant relocation and commissioning will require factory re-inspection before shipping, which may affect short-term inventory, shipping pace, and depreciation costs. Overall revenue is expected to be stable throughout 2024, and the automotive and new energy business is expected to maintain rapid growth under pressure on the industrial side. The growth in the automotive business was mainly due to an increase in the share of leading customers, a steep rise in order delivery from more customers, and accelerated shipments of high-speed connector products.
Investment advice: The company's net profit for 2024-2026 is expected to be 1.00/133/178 million yuan, corresponding PE is 43/33/24X, respectively, maintaining a “buy” rating.
Risk warning: Market competition intensifies; market demand falls short of expectations; high pressure on customers to cut prices.