2023 performance: operating income of 2,683 billion yuan, +26.09% year on year; net profit to mother of 590 million yuan, +29.75% year over year; net profit after deducting non-attributable net profit of 566 million yuan, +64.20% year on year.
23Q4 performance: operating income of 635 million yuan, +18.75% year over month, -11.2% month on month; net profit to mother of 111 million yuan, +60.27% year on year, -34.79% month on month; net profit without return to mother of 103 million yuan, +83.69% year on year.
24Q1 performance: operating income of 690 million yuan, +17.28% year over month; net profit to mother of 142 million yuan, +15.36% year on year, +26.92% month on month; net profit without return to mother of 132 million yuan, +12.83% year on year.
The increase in performance was mainly due to strong demand for downstream automation. The downstream custom furniture industry continues to transform to intelligence, driving the demand for efficient automated furniture equipment. The company relies on continuous technological research and development progress, improves product performance and innovation capabilities, implements the “expansion and decline” market strategy, and launches high-end products (such as high-speed flexible edge banding machines, precision double-end edge banding machines, vertical and horizontal CNC sawing centers, and multi-function drilling and milling composite processing centers) and cost-effective automated equipment to increase its market share.
Laying out a global sales network, overseas growth is in line with expectations. In the international market, the company increases brand promotion, deepens cooperation with overseas distributors, and actively enters emerging markets such as North America and South America. In '23, the company achieved overseas revenue of 812 million yuan, +5.9% year-on-year, accounting for 30.26% of total revenue, or -5.76pct year-on-year. The share decline was mainly due to the recovery in domestic demand in '23, where domestic revenue growth rate reached 37.45% year on year.
Gross profit margin: up 3.03 pct year on year 23 to 33.28% year on year, down 1.27 pct year on year in 24Q1, to 30.84%. The increase in gross margin in '23 was mainly due to an increase in sales volume and an increase in scale. By product, the gross margin of edge banding machine/multi-row drill/processing center/cutting board saw was +1.82pct/+5.88pct/+4.52pct/+5.42pct, respectively. Among them, the revenue share of multi-row drills with the biggest increase in gross margin increased by 2.4 pct. The decline in gross margin in 24Q1 is mainly because the company's new production capacity is still climbing, and the scale effect has not yet been reflected.
Expense rates and net interest rates are stable. The company's total expense ratio for the 23-year period was 8.78%, -1.6 pct year on year, mainly due to revenue growth and diluted expenses; the total cost ratio for the 24Q1 period was 8.09%, which was basically the same as the previous year (-0.79pct). The company achieved a net interest rate of 22.05% in '23, -0.69pct year on year, and a net profit margin of 20.72% in 24Q1, and -0.23pct year on year, which remained stable.
Cash flow remains excellent. The net cash flow from the company's 23 years of operating activities was 702 million, and 24Q1 was 144 million. The revenue quality was high, mainly due to close cooperation and strong trust relationships between the company and dealers to ensure after-sales service quality and control sales expenses while maintaining a good accounting period.
Production capacity: The company's Guangzhou edge banding machine manufacturing base and Foshan CNC equipment manufacturing base were put into trial operation in November 2023 and January 2024 respectively. They are currently in the production capacity climbing stage. As equipment commissioning is completed and management and technical staff are in place, the capacity utilization rate will gradually increase, which can meet the timely response of downstream customers to regular orders and non-standard order requirements.
Maintain a “Highly Recommended” investment rating. Hongya CNC has benefited from category expansion, globalization, and automated demand upgrading. It has focused on the industry over the years, expanding horizontally and vertically, and is expected to continue to increase its market share. We expect the company's revenue to be 31/35/3.9 billion, up 15%/14%/12% year on year; net profit to mother will be 7.2/8.4 billion, up 22%/16%/10% year on year, and the corresponding PE is 13/11/10 times, maintaining strong recommendations.
Risk warning: Demand falls short of expectations, increased competition in the industry, and risk of overcapacity.