Matters:
Sanhua Intelligent Control achieved operating income of 24.56 billion yuan in 2023, +15.0% year-on-year, and realized net profit of 2.92 billion yuan, or +13.5% year-on-year. Looking at a single quarter, 23Q4 revenue was 5.58 billion yuan, -2.9% year-on-year, net profit to mother 760 million yuan, -19.5% year-on-year, after deducting non-return net profit of 690 million yuan, +28.7% year-on-year.
24Q1 revenue was 6.44 billion yuan, +13.4% year on year, net profit to mother 650 million yuan, +7.7% year on year, net profit without return to mother of 670 million yuan, +20.5% year on year.
Commentary:
Revenue growth is steady, and the share of zero cars continues to rise. The company's revenue in '23 was +15% year-on-year, with Q4 falling 2.9%, mainly affected by adjustments in revenue recognition caliber. By business, the company's refrigeration and auto parts business achieved revenue of 146.4 billion yuan and 9.91 billion yuan respectively in 2013, +5.9% and +31.9% year-on-year respectively. Among them, the auto zero business benefited from continued rapid growth in the development of global automobile electrification. In '23, the company's zero auto revenue accounted for 40.4%, of which the new energy business already accounted for more than 90%. By region, the company's domestic and overseas revenue in '23 was 13.4.0 billion yuan and 11.15 billion yuan respectively, +17.4% and +12.3%, respectively. Export sales revenue accounted for 45%, and the global layout was getting better. 24Q1 benefited from the high increase in domestic air conditioning production and the continued development of the auto parts business. The company's revenue increased by 13.4%. In the future, as the external environment improves, revenue is expected to maintain steady growth.
Gross margin increased steadily, and gains and losses on futures and foreign exchange affected profits. The net profit performance of the 23Q4 and 24Q1 companies withheld from mother was significantly superior to the growth rate of net profit attributable to mother. The difference or non-recurring profit and loss mainly due to raw material futures and exchange rate derivatives was steady after excluding the impact. Among them, net profit from the refrigeration and auto zero businesses in '23 was 1.49 billion and 1.43 billion, respectively, and net profit margins were 10.2% and 14.5% respectively. The increase in the share of the auto zero business with high net interest rates is expected to drive the long-term upgrading of the company's profit level. In terms of profitability, the company's gross margins for 23Q4 and 24Q1 were 29.2% and 27.1% respectively, with year-on-year increases of +0.6 and +1.5pct, respectively, mainly benefiting from factors such as increased scale effects, product structure optimization, and declining exchange rates and shipping costs. In terms of costs, the cost rate for the 23Q4 and 24Q1 periods was 14.1% and 13.1%, -2.3 pct and -0.6 pct year-on-year. Under the combined influence, the company's 23Q4 and 24Q1 non-net interest rates were 12.4% and 10.4%, compared with +3.1 pct and +0.6 pct, and profitability remained steady.
The new business is expanding steadily, and we look forward to long-term development. According to the company's disclosure, in 2023, the company's NEV parts sales volume was 62.518 million units, up 63.0% year on year, showing explosive growth. Auto parts companies are gradually developing from valves and components to integrated components, and future orders and bicycle value are expected to continue to rise.
In addition, the company has increased its third growth curve layout and plans to issue GDR to expand global production base construction, robot mechatronic actuator projects, and the layout of thermal management components. With the breakthrough in humanoid robot production, the company is expected to open up the growth ceiling. We believe that the company has a leading global layout and product strength, stable inherent customer relationships, the original advantages are expected to be reused and expanded to a new track, and there is sufficient confidence in long-term development.
Investment advice: Considering that increased competition from Auto Zero customers affects order delivery, we adjusted the company's net profit forecast for 24/25 to RMB 35.6/4.16 billion yuan (original value was 38.5/4.77 billion yuan), and the additional 26-year forecast was RMB 4.88 billion, corresponding to PE 23/20/17 times, respectively. Referring to the absolute valuation method, the company's target price was lowered to 29 yuan, corresponding to 31 times PE in 24 years, maintaining the “strong push” rating.
Risk warning: Demand for terminals falls short of expectations, zero competition for NEVs intensifies, and raw material prices fluctuate greatly.