Incident: In 2023, the company achieved operating income of 6.75 billion yuan, an increase of 23.3% over the previous year; achieved net profit of 630 million yuan, an increase of 33.1% over the previous year; net profit after deducting non-return to mother was 360 million yuan, an increase of 39% over the previous year. In the first quarter of 2024, the company achieved revenue of 1.83 billion yuan, a year-on-year increase of 17.3%; realized net profit of 140 million yuan, a year-on-year decrease of 14%; net profit after deducting non-return to mother was 120 million yuan, an increase of 25.6% over the previous year.
The level of profit was further improved, and R&D investment remained high. Profit side: In 2023, the company's gross sales margin/net margin was 24.9%/9.3%, up 1.2pp/0.5pp; 24Q1 gross margin/net margin was 25.9%/7.7%, respectively, +1.8pp/ -2.6pp. Cost side: The company's 2023 sales/management (excluding R&D)/financial/ R&D expenses ratio was 4.8%/3.1%/0.4%, respectively, +0.6pp/+0.4pp/+0pp compared with each other. The increase in the sales expense ratio is mainly due to the increase in the company's personnel and the increase in exhibition and travel expenses. In 2023, the company's R&D expenses rate was 11.4%, maintaining a high position and increasing the “moat” of product competition.
Overseas markets are expanding rapidly and profitability is better. The company achieved overseas revenue of 1.95 billion yuan in 2023, up 15% year on year, gross margin of 29.5%, up 3pp year on year, 6.4pp higher than domestic gross margin. The company has taken “accelerating overseas layout and expanding overseas markets” as an important strategic direction for future development. Currently, it has established overseas R&D centers in the US and Germany, and has invested in production capacity construction in Thailand, India and the US to improve the company's global supply chain layout, which can meet the manufacturing and delivery needs of customers in overseas regions. Compared with international peers, the company has a better cost performance ratio and a faster corresponding speed, and the internationalization process is expected to be further accelerated.
The industrial automation business is growing rapidly, and the number of fixed train stations continues to increase. In 2023, the company's industrial automation/trams and rail transit achieved revenue of 58,000,000 yuan, up 53.7%/34.8% year on year, and gross margin increased 3.5 pp/1.7 pp year on year, respectively. The tram business has expanded to customers such as Jinkang and FAW, and application scenarios have also been expanded, helping to increase sales scale. Furthermore, the company's power products business has now gradually moved from the investment period to the harvest period, and it is expected to continue to provide performance growth.
Continue to invest in the upstream and downstream industrial chains around power electronics technology, and continuously expand business areas through “mergers and acquisition+incubation”. In 2023, the company added 9 new participating companies, and the total amount of foreign equity investment was 150 million yuan; during the reporting period, it received fair value change income and investment income totaling 280 million yuan due to the increase in the valuation of investment companies. As of the 23 annual report, the company has invested in 42 foreign equity companies. Through this business model, it is expected that the scope of the company's business will gradually expand and the integrated development of the industrial chain will be realized.
Profit forecasting and investment advice. The company's revenue for 2024-2026 is expected to be 8.37 billion yuan, 10.12 billion yuan, and 12.01 billion yuan respectively, and the net profit growth rate for the next three years will be 23.8%/30%/22%, respectively. The company has taken root in the power electronics industry, and its business has blossomed a lot, fully benefiting from the boom in many downstream industries, promoting the continuous improvement of the company's performance, giving the company 20 times PE in 2024, corresponding to a target price of 31.00 yuan, and maintaining a “buy” rating.
Risk warning: the risk of fluctuations in the macroeconomic situation; the risk of structural prices and supply of raw materials; the risk of exchange rate fluctuations affecting the company's overseas business; the risk that downstream demand falls short of expectations; the risk of new product development and delivery falling short of expectations; the risk of foreign equity investment and changes in fair value affecting the company's performance.