Key points of investment
Multiple factors put pressure on the company's Q1 performance in the short term
In the first quarter of 2024, the company achieved revenue of 142 million yuan, an increase of 1.40% over the previous year. The delay in Q1 revenue growth was mainly due to the company's obvious seasonal nature of business revenue, which accounted for a relatively small share of revenue in the first quarter. The company said that businesses with high revenue growth expectations are expected to be gradually released in the second and third quarters.
24Q1 achieved net profit of 0.2 billion yuan, a year-on-year decrease of 48.81%; the year-on-year decline was mainly due to increased expenses in the Q1 quarter, including (1) an increase in the number of employees and an increase in remuneration; (2) equity payments due to equity incentives in 2023; and (3) depreciation, leasing, transformation, and an increase in fuel and power costs due to the completion and commissioning of the Jiashan Industrial Park and the expansion of business space such as new leased plants.
In the 24Q1 quarter, the company achieved a gross sales margin of 41.74%, a year-on-year decrease of 4.67pct, mainly due to (1) changes in product structure, the share of revenue from high-margin healthcare businesses declined, and the revenue share of relatively low gross profit products such as automotive electronics increased; (2) Currently, production capacity in Jiashan Industrial Park is gradually climbing, which has had an impact on gross margin; 24Q1 achieved a net sales margin of 14.31%, an increase of 0.69pct over the previous year.
The revenue structure continues to be optimized
In the 24Q1 quarter, emerging businesses represented by the industrial and safety business, automotive electronics business, and smart metering business continued their 23-year rapid growth trend. In the Q1 quarter, revenue from the smart metering business, which mainly focuses on ultrasonic gas meters and its modules, increased 240.02% year on year; revenue from the industrial and safety business, which mainly focuses on refrigerant leak monitoring sensors, increased 59.85% year over year; revenue from the automotive electronics business, which mainly focuses on automotive comfort system sensors, increased 37.56% year over year, and the overall emerging business progressed smoothly. The HVAC business revenue in Q1 fell by 3.96% year on year. The decline was significantly lower than in '23, and the steady trend was obvious.
Q2 is expected to usher in an inflection point in performance
Looking ahead to the Q2 quarter, the company's many reserve businesses are expected to be delivered in batches. Among them, UL certification of related products has progressed smoothly, providing a guarantee for subsequent large-scale deliveries; in the HVAC business, controller/detector products have been delivered in batches; in the automotive electronics business, the delivery of automotive comfort system sensors and targeted expansion of new projects are in line with expectations. Engine nitrogen emission sensors and engine emission oxygen sensors suitable for motorcycles and ventilators have successfully entered the market and delivered in batches. The company said that businesses that are expected to grow more in revenue are expected to be gradually released in the second and third quarters, and the Q2 quarter is expected to usher in an inflection point in performance.
Profit forecasting and valuation
The company's net profit for 24-26 is estimated to be 2.0, 2.8 billion yuan, and 370 million yuan, respectively. The corresponding PE multiples for 24-26 are 18, 13, and 10 times, respectively, maintaining a “buy” rating.
Risk warning
The HVAC business fell short of expectations, and the development of emerging businesses fell short of expectations, etc.