Sanhua Intelligent Control's revenue in 2023 increased 15% year-on-year. The company achieved operating income of 24.558 billion yuan in 2023, an increase of 15% over the previous year, and achieved net profit of 2,921 billion yuan to mother, an increase of 13.5% over the previous year.
2024Q1 achieved operating income of 6.440 billion yuan, a year-on-year increase of 13.4%, a month-on-month increase of 15.4%, and a net profit of 648 million yuan, an increase of 7.7% year-on-year and a decrease of 14.9% month-on-month. The increase in the company's performance was due to: 1) Continued volume of orders for the company's NEV business. In 2023, the auto zero business revenue was 9,914 billion yuan, an increase of 31.9% over the previous year (the NEV business accounted for 90% of the revenue in the auto zero business). 2) The market share of leading products of refrigeration and air conditioning appliances business companies has steadily increased. 3) The energy storage business has successfully broken through industry benchmark customers and achieved revenue.
The gross margins of the zero and refrigeration businesses all increased in 2023, and profitability fluctuated between quarters. The company's gross sales margin in 2023 was 27.89%, +1.81 pct year on year, and the net sales margin was 11.95%, -0.27 pct year on year. The gross profit margin of the auto zero business in 2023 was 27.43%, +1.51pct year on year, and the gross profit margin of the refrigeration business was 28.20%, +2.04pct year on year. In 2024, the company will continue to promote intelligent standardized integrated component products, optimize product design, self-manufacture of key equipment, and reduce comprehensive costs. It is expected that with product standardization and scale, profitability will increase.
The global layout is progressing steadily, consolidating the leading position. Currently, the company has the largest market share of air conditioning electronic expansion valves, four-way reversing valves, solenoid valves, microchannel heat exchangers, Omega pumps, automotive electronic expansion valves, and integrated thermal management components for new energy vehicles in the world. In terms of the global layout in 2024, 1) Refrigeration business: Promoting the reform of Aweko in Europe to turn losses into profits. Completed the construction of the second phase of the Vietnam plant, implemented production lines, and expanded production lines in Mexico and Thailand. 2) Auto parts business: Actively promote the construction of production bases in Mexico, Poland, etc.
Invest in intelligent variable frequency controllers, robot servo motor controllers, and domain controller projects to open up new growth points. In January 2024, the company signed the “Sanhua Intelligent Control Future Industrial Center Project Investment Agreement”, with a total planned investment of not less than 5 billion yuan. The projects include 1) the company's holding subsidiary Xiantu Electronic Intelligent Variable Frequency Control Controller Project, 2) the Sanhua Intelligent Control Robot Servo Electromechanical Actuator Project and the Thermal Management Domain Controller Project. The above layout is conducive to the company's expansion from the development of mechanical components to the development and upgrading of integrated electronic control system control technology solutions, and to the direction of inverter control technology and system integration upgrades. It is also the main source of the company's potential growth points.
Risk warning: NEV sales fall short of expectations, rising raw material prices, technical risks, policy risks, customer development risks, exchange rate risks, etc.
Investment advice: Lower profit forecasts and maintain a “buy” rating. Considering the new energy customer model cycle and increased competition in the industry, the profit forecast was lowered. The company's net profit for 2024-2026 was 35.38/43.02/5,095 billion yuan (the original 2024/2025 forecast was 38.26/4.655 billion yuan), with earnings per share 0.95/1.15/1.37, corresponding PE of 23/19/16 times, maintaining the “buy” rating.