Ningbo Jingda released its 2024 quarterly report. In the first quarter of 2024, the company achieved operating income of 183 million yuan, an increase of 17.23% over the previous year; realized net profit of 533.232 million yuan, an increase of 40.97% over the previous year; and realized net profit of 503.41 million yuan without return to mother, an increase of 57.81% over the previous year. The company's performance has been growing steadily over the years, and dividends are strong. This year, it is expected to benefit from equipment updates and home appliance trade-in policies, and maintain a “highly recommended” rating!

The performance exceeded expectations, and the volume of export business led to an increase in the company's profitability. In 24Q1, the company's net profit growth rate was much higher than the revenue growth rate, judged to be due to the continued expansion of the company's overseas business with higher gross margins.

In 2023, the company's gross margin of overseas business was 54.85%, +4.9pcts year on year; domestic business gross margin was 33.74%, -3.33pcts year on year. The company's overseas gross margin was 21.11 pcts higher than the domestic one.

In 2023, the company's overseas revenue increased by 40.33% year-on-year, judging that some orders in the fourth quarter were accepted in the first quarter. Furthermore, overall overseas demand in the first quarter continued the high growth rate of last year.

By business, the company's heat exchanger equipment and press equipment have entered the supply chain of many well-known overseas companies.

1. Heat exchanger equipment: The main downstream application areas of the company's heat exchanger equipment are household appliances and air conditioning. In recent years, the air conditioning (household, commercial, automotive) industry has accelerated the construction of overseas factories, and demand for the company's equipment has grown rapidly; the company's main customers include Midea, Gree, Haier, Hitachi, and Daikin. 2. Press equipment: The main downstream application areas of the company's press equipment are battery structural parts for new energy vehicles and motor cores. Benefiting from the return of manufacturing from various countries and the increase in the penetration rate of new energy sources overseas, the number of well-known overseas customers of the company's press equipment continues to increase. Overseas press sales achieved breakthrough growth in 2023, becoming a supplier to leading global auto parts companies such as Denso and Magna.

The dividends are strong, and the cumulative dividends far exceed the funds raised. The company plans to distribute a cash dividend of 2.90 yuan (tax included) for every 10 shares to all shareholders. Cash dividends in 2023 accounted for 79.75% of net profit to mother in '23. The company's total dividends in the past three years were 279 million yuan, which has already exceeded the capital raised when it went public in 2014.

It is proposed to acquire Wuxi Weiyuan Research to achieve collaborative business development. On April 23, 2024, the company issued an announcement stating that it intends to acquire 100% of the shares of Wuxi Weiyan. Since the transaction constituted a related transaction, the company suspended trading on April 24 and resumed trading on April 30. The company plans to acquire Wuxi Weiyan shares by issuing shares to Ningbo Shaping Holdings Co., Ltd. to raise supporting capital and pay cash. The main business of Wuxi Micro Research is the design and production of precision molds and their parts, and the business has great synergy with the company. In 2022, Wuxi Micro Research achieved revenue of 229 million yuan and net profit of 35.581 million yuan.

Investment advice: Ningbo Jingda's performance has been growing steadily over the years, and dividends are strong. This year, it is expected to benefit from the major trend of equipment renewal and home appliance trade-in, and growth in overseas business. We expect that in 24/25/26, the company will achieve operating income of 823, 9.94, and 1,174 million yuan, respectively, and net profit of 1.87, 223, and 261 million yuan, corresponding to PE 18.9/15.8/13.5 times PE. Maintain a “Highly Recommended” rating!

Risk warning: The international trade environment has deteriorated, the volume of large cylinder series equipment has fallen short of expectations, etc.