In 2023, the company achieved operating income of 360 million yuan, a year-on-year decrease of 20.1%; realized net profit of 80 million yuan, a year-on-year decrease of 45.8%; a net operating cash inflow of 150 million yuan, an increase of 470.8%; comprehensive gross margin of 41.1%, a year-on-year decrease of 7.6 percentage points; and a net interest rate of 23.6%, a year-on-year decrease of 11.3 percentage points.

The company achieved operating income of 80 million yuan in 24Q1, down 7.5% year on year; realized net profit of 0.2 billion yuan, down 18.4% year on year; net operating cash inflow of 7.331 million yuan, down 33.7% year on year; comprehensive gross profit margin of 42.6%, down 1.8 percentage points year on year; net interest rate of 25.3%, down 2.4 percentage points year on year.

Firmly optimistic about the industrial automation and robotics industry, continue to increase investment in R&D, fixed asset investment in China's 3C electronic products, semiconductor and other industries will slow in 2023, and demand in the company's downstream industrial robotics and other industries will be under pressure. By product: ① Harmonic reducers and metal parts achieved operating income of 320 million yuan, a year-on-year decrease of 23.8%; gross margin was 41.2%, a year-on-year decrease of 7.6 percentage points. ② Mechatronic products achieved revenue of 0.3 billion yuan, an increase of 30.8% year on year; gross margin was 41.0%, down 1.4 percentage points year on year. ③ Intelligent automation equipment achieved revenue of 2.341 million yuan, a year-on-year increase of 1891.9%; gross margin was -12.6%, a year-on-year decrease of 18.8 percentage points.

The company's R&D investment increased as a share of revenue to 13.59% in 2023, an increase of 3.3 percentage points over the previous year.

The company has established research institutions such as the Suzhou Key Laboratory for Core Technology of Key Components for Bionic Robots and the Suzhou High Performance CNC Turntable Engineering Technology Research Center.

Promote production expansion and product iteration

The company closely follows the development pace of intelligent robots and optimizes iterative products. In order to meet the application requirements of intelligent robots such as high torque density, high rigidity and high dynamic response, the company has further iteratively improved the harmonic speed reducer. At present, the company's harmonic reducer products have a full range of products covering the relevant needs of intelligent robot rotation modules. The company completed the procurement of housing construction and related equipment for the production expansion project with an annual output of 500,000 precision reducers, and plans to complete the construction, commissioning and production of related intelligent production lines within 2024. At the same time, production capacity is planned in Mexico to meet customer needs in the North American market.

Investment advice: Due to weak downstream demand for industrial robots, we expect the company's net profit to mother of 13/220 million yuan (down 13.1%/9.3%) in 24-25, and an additional net profit forecast of 300 million yuan for 2026.

Considering that the acceleration of the industrialization of humanoid robots in the future will drive a sharp increase in demand for precision speed reducers, the company, as a leading domestic harmonic reducer company, will benefit deeply and maintain an “increase” rating.

Risk warning: The recovery of the industrial robot market falls short of expectations; the industrialization of humanoid robots falls short of expectations; the company's production capacity release schedule falls short of expectations.