Core views
In 2024, the company's revenue, net profit to mother, and net profit after deducting non-net profit were 416 million yuan, 0.49 million yuan, and 66 million yuan respectively, up 25.98%, -19.70%, and 10.22% year-on-year respectively. As new projects continue to be implemented, the company's customer structure is expected to usher in continuous optimization. At the same time, the company has sufficient cash reserves, undervaluation compounded high dividends to create a margin of safety, and employee stock ownership plans guarantee the company's internal driving force. We are optimistic that the company will continue to grow steadily. The company's net profit from 2024-2025 is estimated at 350 to 420 million yuan, corresponding to current PE of 13X and 10X, maintaining a “buy” rating.
occurrences
1) The company released its 2024 quarterly report. In 2024, the company's revenue, net profit to mother, and net profit after deducting non-net profit were 416 million yuan, 0.49 million yuan, and 66 million yuan respectively, up 25.98%, -19.70%, and 10.22% year-on-year respectively.
Brief review
The main business performed well, and changes in fair value affected profits. In 2024, the company's revenue, net profit to mother, and net profit after deducting non-net profit were 416 million yuan, 0.49 million yuan, and 66 million yuan respectively, up 25.98%, -19.70%, and 10.22% year-on-year respectively. The increase in revenue was mainly due to sales growth of more than 30% for core customers. The decline in net profit to the mother was mainly affected by changes in fair value and the cost of the shareholding plan for additional employees. The profit and loss from the 2024 Q1 fair value change was RMB 1993.56 million, and the employee shareholding plan share payment fee was RMB 11.5987 million. The above total affected net profit of RMB 268.458 million. The net profit corresponding to the company's main business after restoration was RMB 76 million, an increase of 24.52% over the previous year. In the future, the company will step up its supervision of equity assets to reduce the impact on the business performance of the company's owners.
The impact of annual declines on gross margin is manageable, and net interest rates have increased month-on-month due to strengthened cost control.
The gross profit margin, net profit margin, and period expense ratio for Q1 in 2024 were 26.98%, 11.71%, and 7.89%, respectively, with month-on-month increases of -1.32, +1.23, and -1pct, respectively. The decline in gross margin was affected by the annual decline in customers. The company strengthened cost control, leading to a further recovery in net interest rates.
The risk of changes in fair value is manageable, and high dividends continue to be paid out. Q1 Affected by fluctuations in equity investment, changes in fair value drag down performance. In the future, the company will strengthen the management of equity assets, adjust the plan in due course, and is expected to recover in the future. At the same time, the company issued the “2023 Equity Distribution Notice”, with a cash dividend of 0.50 yuan per share. The share registration date, exclusion date, and cash dividend payment date are April 30, May 6, and May 6, respectively. Based on the closing price on April 26, the dividend rate is about 5%, and high dividends have continued to be paid out over the years.
Investment advice
The company is mainly engaged in the manufacture of lightweight automotive parts. Its products include engine blocks, cylinder heads (can be used for range extension & hybrid), tri-electric housings, electric drive assemblies, etc. As new projects continue to be implemented, the company's customer structure is expected to usher in continuous optimization. At the same time, the company has sufficient cash reserves, undervaluation compounded high dividends to create a margin of safety, and employee stock ownership plans guarantee the company's internal driving force. We are optimistic that the company will continue to grow steadily. The company's net profit from 2024-2025 is estimated at 350 to 420 million yuan, corresponding to current PE of 13X and 10X, 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.