Incidents:
Mingzhi Electric released its 2023 annual report and 2024 quarterly report. In 2023, it achieved revenue of 2,543 billion yuan, or -14.09%, and realized net profit of 140 million yuan, or -43.20% year on year; in 2024Q1, it achieved revenue of 608 million yuan, -6.34% year on year, and net profit to mother of 06 million yuan, or -80.03% year on year.
Global inventory removal affects product demand, and relocation of production sites affects production capacity. In 2023, the company's operating income and net profit declined by a certain margin due to the trend in the overseas market supply chain to be de-inventoried, and the relocation of the company's former Shanghai production base to the Taicang base, while the new Vietnamese production base did not reach production. Affected by the decline in revenue, the company's average gross margin fell 1pct to 37.2% year over year in 2023. 2024Q1, overseas demand inventory removal continues to affect demand, and the revenue side has not recovered. On the profit side, since the company has prepared a large inventory of raw materials, as customer demand weakens, actual order demand may be cancelled or delayed, leading to a significant increase in inventory price reduction preparations, which affects profitability. In terms of cash flow, the company strengthened accounts receivable and inventory control. Net operating cash flow in 2023 was +2297.25% to 203 million yuan, and 2024Q1 net operating cash flow was +49.41% year-on-year to 024 million yuan, an improvement of significant improvement.
Continue to develop high value-added products to reduce costs and increase efficiency, and actively explore emerging application fields. The company's core business is mainly motor control and drive. It is committed to developing new products with high added value, continuously optimizing product structures, reducing production costs, and developing emerging growth points, including brushless motors, precision linear transmission systems, and system-level drive control systems. Looking at downstream applications, in 2023, the company's control motor and drive business revenue in the photovoltaic/lithium battery/semiconductor sector increased by about 22% year on year; revenue in the field of smart cars and autonomous driving/lidar increased by about 35% year on year; revenue in the medical and biochemical testing equipment and robotics fields decreased by 20% and 14% year over year, but considering the future importance of the company's hollow cup motor products in the medical and robotics fields, it is expected to become an important downstream application in the long term.
Investment advice:
We expect the company's net profit to be 1.92/2.81/369 million yuan in 2024-2026, an increase of 36.5%/46.3%/31.6%, corresponding PE levels 123/84/64 times, respectively.
Considering the steady growth of the company's main HB stepper motor business, various products in the humanoid robot field are expected to benefit. The construction of the micromotor platform is being improved, and the target price for 6 months is 64 yuan, corresponding to the 2024 PE 139X, maintaining the “Increased holdings - A” rating.
Risk warning: Investment in manufacturing is sluggish, robot promotion falls short of expectations, and market competition intensifies.