Core views
In Q1 2024, we achieved revenue, net profit attributable to mother, and net profit excluding net profit of 17.55 billion yuan, 0.66, and 55 million yuan, with year-on-year changes of 9.08%, -13.99%, and -17.94%, respectively. The company is a leading domestic die-casting company. It is deeply involved in the die-casting business and automotive interior and exterior parts business. Changes in management since 2020 have been transmitted to the performance level. I am optimistic about the card position advantages of the company's integrated die-casting and the steady increase in performance due to improved management. It is estimated that in 2024-2025, the company's net profit will be 4.53 or 500 million yuan, corresponding to the current PE of 19X and 17X, maintaining a “buy” rating.
occurrences
1) The company released its 2024 quarterly report. In Q1 2024, we achieved revenue, net profit attributable to mother, and net profit excluding net profit of 17.55 billion yuan, 0.66, and 55 million yuan, with year-on-year changes of 9.08%, -13.99%, and -17.94%, respectively.
2) The company released its 2023 annual report. In 2023, revenue, net profit attributable to mother, and net profit excluding non-return to mother were 76.15, 4.23, and 392 million yuan, with year-on-year changes of 14.13%, -9.15%, and 8.96%, respectively.
Brief review
Revenue grew steadily throughout the year, excluding Baolong transfers affecting the year-on-year increase in profit. In 2023, the company achieved revenue, net profit attributable to mother, and net profit excluding non-return to mother of 76.15, 4.23, and 392 million yuan, with year-on-year changes of 14.13%, -9.15%, and 8.96%, respectively. By business, aluminum castings and injection-molded parts accounted for 71.32% and 27.15% respectively, achieving revenue of 54.31 billion yuan and 2,067 billion yuan, up 13.69% and 13.14%, respectively. Revenue growth in 2023 was due to the company's transformation to new energy sources and the acceleration of new customer expansion for new projects. The company completed the equity transfer to Guangdong Baolong, a former holding subsidiary, in the same period in '22, leading to a positive increase in performance during the same period in '22, and a passive year-on-year decline in net profit to the mother in '23. Excluding the impact of this matter, net profit attributable to mother was +6.42% YoY. In 2023, the company's NEV products achieved sales revenue of 1,284 million yuan, an increase of 358 million yuan compared to 926 million yuan in 2022, an increase of nearly 40% over the previous year, accounting for an increase of 23.76% in the sector's sales ratio. The concentration of the company's top five customers in 2023 was 33.59%, a significant decrease from 37.45% in 2022. In 2023, the company actively expanded new customers and reached cooperation with 6 companies including Scania and Huichuan Technology to increase the market share in the horizontal industry and vertical business. Furthermore, the company promotes a “factory-in-factory” layout and builds factories close to customers. Innovative business cooperation models are conducive to customer expansion.
In 2024, the company achieved revenue, net profit attributable to mother, and net profit excluding net profit of 17.55 billion yuan, 0.66, and 0.55 billion yuan, with year-on-year changes of 9.08%, -13.99%, and -17.94%, respectively.
The decline in gross margin in '23 is due to annual decline and the transformation of new energy sources, leading to increased costs due to R&D and new construction projects. The company's gross profit margin, net profit margin, and period expense ratio in 2023 were 18.99%, 5.86%, and 12.23%, respectively, with year-on-year changes of -0.63, -1.34, and +2.99 pct, respectively. The annual sales expense ratio, management cost rate, R&D expense ratio, and financial expense ratio were 3.04%, 4.16%, 4.62%, and 0.41%, respectively, compared with -0.38, +0.15, +0.08, and +0.14pct, respectively. The gross margins of aluminum castings and injection-molded parts were 18.18% and 19.81% respectively for the whole year, down 0.18pct and 2.11pct year-on-year. Gross profit margin declined in '23. It is affected by the annual decline of traditional car companies and the transformation of new energy businesses. The increase in the cost side stems from the launch of new construction projects and the increase in R&D investment. The gross profit margin, net profit margin, and period expense ratio for Q1 in 2024 were 15.03%, 3.63%, and 11.28%, respectively, with year-on-year changes of -3.46, -1.09, and -1.44pct, respectively.
Strive to promote R&D innovation and upgrading, and ensure future development with equipment+technical advantages. 1) Die-casting sector. The world's largest tonnage 12000T intelligent die-casting unit was officially put into operation in July 2023, and the world's first 16,000T oversized die-casting unit developed in collaboration with Lijin Group was officially unveiled at the end of October. The company pioneered the layout of ultra-large integrated die-casting equipment; the interior and exterior sector, where the tonnage of injection molding machines covers 80T to 3300T, and can complete a series of processes such as injection molding, spraying, and metallization. Advanced equipment lays the foundation for the company's future business expansion. 2) The company continues to promote R&D innovation in the fields of die-casting materials, technology, etc., and the patent, standard and technical award indicators rank first in the industry. A series of high-strength, heat-free aluminum alloy materials have been developed and successfully applied to the development of integrated die-casting products. Large-scale molds have been independently developed, more than half of the molds have been self-manufactured, and technically have the ability to optimize the design of large and complex products.
Investment advice
The company is a leading domestic die-casting company. It is deeply involved in the die-casting business and automotive interior and exterior parts business. Changes in management since 2020 have been transmitted to the performance level. I am optimistic about the card position advantages of the company's integrated die-casting and the steady increase in performance due to improved management. It is estimated that in 2024-2025, the company's net profit will be 453 or 500 million yuan, corresponding to the current PE of 19X and 17X, maintaining a “buy” rating.
Risk analysis
1. The industry boom falls short of expectations. Demand and future industry sentiment may fluctuate in anticipation of a decline in policy support in 2024.
2. The competitive pattern of the industry has deteriorated. Domestic and foreign parts suppliers compete. With changes in supply factors such as technological progress and new production capacity investment, industry competition may intensify in the future, and the company's market share and profitability may fluctuate.
3. The progress of customer development and mass production of new projects fell short of expectations. The company is accelerating the expansion of new customers. Considering the fluctuation in the pace of development of new model projects by car companies, there may be fluctuations in the fixed project cycle within a specific period of time; in addition, the company's new production capacity construction may be affected by uncontrollable factors, causing mass production progress to fall short of expectations.