Fuchuang Precision released its 24Q1 quarterly report. 24Q1 revenue was 700 million yuan, +105.5% /month-on-month, and single-quarter revenue reached a record high; after deducting non-net profit of 54 million yuan, +1385% /month-on-month +10%. Looking forward to a positive trend in revenue and profit growth in 2024. Maintain an “overweight” investment rating.
24Q1 revenue reached a record high, and profit margins improved markedly year over year. 24Q1 revenue of 700 million yuan, +105.5% y/month-on-month +3.8%, single-quarter revenue reached a record high; gross profit margin was 25.4%, -3.8pcts/month-on-month +4.1pcts, gross margin was under pressure, mainly due to the rapid increase in revenue from module products with low gross margin since 2023; net profit of 60 million yuan, +53.4% /month-on-month +65%; net non-net profit of 0.54 million yuan, +1385% /month-on-month +10%; net non-net interest rate 7.7%, year-on-month +6.8pcts/month-on-month 0.4 pct Driven by downstream customer demand, the company's revenue grew high year on year; the scale effect continued to show. The cost rate during the 24Q1 period was 19.8%, a year-on-year decrease of 5.8 pcts, and the year-on-year profit growth rate was much higher than the revenue growth rate.
The company's domestic and foreign revenue performance was divided in 2023, and revenue growth is expected to accelerate in 2024. The company's revenue in mainland China in 2023 was 1.44 billion yuan, +72% year-on-year, mainly due to continued increase in demand for domestic parts localization; revenue from outside the mainland was 600 million yuan, -13.3% year over year, mainly due to factors such as overseas sentiment and geography. According to the guidelines of leading overseas equipment companies such as ASML and LAM, 2024 is a transition year for the global equipment boom, and the industry will usher in strong growth in 2025. Fortune Precision's overseas revenue share in 2023 is 30%, and growth is expected to resume in 2024. At the same time, considering that orders from domestic equipment manufacturers are expected to grow at a high year-on-year rate in 2024, and that the localization rate of superimposed components continues to rise, the company's domestic business revenue growth is expected to accelerate. The company's 2023 equity incentive plan is also optimistic about future revenue guidance. The trigger values for the 2024/2025 revenue assessment were $2.8/40 billion, up 35.5%/42.9% year on year, respectively; the revenue assessment target values were $36/4.5 billion, respectively, up 74.2%/25% year on year.
The company's gross margin was under pressure in 2023, and profit margins are expected to improve markedly in 2024. The company's gross margin has been under pressure since 2023, mainly due to 1) Revenue growth of component products that take up more machinery and equipment than expected. The company's early investment in machinery and equipment production pace is mismatched with industry sentiment, and the scale effect has not yet been reflected. The gross margins of process components/ structural components/ module products/ gas pipelines for the whole year were 30%/27.7%/19.6%/30%, respectively, compared to -5.5/-6.5/-6pcts; 2) The share of module revenue with low gross margin increased, and the revenue of process components/structural components/module products/gas pipelines in 2023 increased by +12%/-2%/+131%/-21% year-on-year, respectively, with module product revenue accounting for 45.4% year-on-year increase of nearly 20 pcts. Looking ahead to 2024, along with revenue growth at home and abroad and the gradual release of production capacity in places such as Nantong, the company's scale effect will gradually be reflected, and profit margins are expected to reach an inflection point and maintain a clear upward trend. The company's 2024 equity incentive plan sets the trigger values for the 2024/2025 non-net profit deduction assessment of 250 million yuan and 400 million yuan, respectively, with year-on-year increases of 58.2% and 60%, respectively; the target values for the 2024/2025 non-net profit deduction assessment were 400 million yuan and 550 million yuan, respectively, up 153 percent and 37.5% year on year, respectively.
Investment advice. In 2023, the company's domestic business demand increased, and overseas business was under pressure, and 24Q1 revenue and profit resumed high year-on-year growth. Looking ahead to 2024, the company's domestic and overseas business revenue is expected to accelerate, the combined production capacity release will bring about a scale effect, and the company's profit margin is expected to improve significantly. We expect the company's revenue in 2024/2025/2026 to be 33.2/45.58 billion yuan, and the estimated net profit to mother is 3.9/5.1/62 billion yuan, corresponding PE is 38.4/29.4/24.0 times, maintaining the “increase” rating.
Risk warning: Risk of falling downstream demand, falling short of expectations of new product expansion, adjustment of product prices, and increased competition in the industry.