Core views

In 2023 and the first quarter of 2024, the company's performance was under short-term pressure: ① Demand from the main downstream industrial robot industry slowed, and the company's revenue declined; ② declining capacity utilization, price concessions from major customers, and upward pressure on expenses during the period remained, and the company's profitability declined.

The company actively lays out new business growth points: ① Continuing to deepen the field of harmonic speed reducers and continuously expand application areas. The company maintains a first-mover advantage with technology accumulation, large-scale production capacity, and forward R&D and design capabilities. ② The company continuously improves the application layout of mechatronic technology, and actively cultivates new business growth points such as hydraulic grinding and polishing tools.

occurrences

Incident 1

In 2023, the company achieved revenue of 356 million yuan, a year-on-year decrease of 20.10%; net profit to mother was 84 million yuan, a year-on-year decrease of 45.81%; net profit after deduction was 75 million yuan, a year-on-year decrease of 41.48%. Among them, Q4 achieved revenue of 102 million yuan in a single quarter, up 0.86% year on year; net profit to mother was 12 million yuan, down 57.31% year on year; net profit after deducting net profit of 08 billion yuan, down 63.55% year on year.

Incident 2

2024Q1 achieved revenue of 82 million yuan, a year-on-year decrease of 7.45%; net profit to mother was 20 million yuan, a year-on-year decrease of 18.39%; net profit after deducting non-return to mother was 0.16 million yuan, an increase of 25.58% year-on-year.

Brief review

The decline in revenue in 2023 was mainly due to demand for downstream robots, and the year-on-year decline in revenue in 2023, mainly due to pressure on demand for downstream robots. Specifically:

① Revenue from harmonic reducers and metal parts was 317 million, down 23.81% year on year, mainly due to sluggish demand in markets such as 3C and semiconductor industries, and a slowdown in fixed asset investment, putting pressure on the company's downstream industrial robotics and other industries. According to the National Bureau of Statistics, domestic industrial robot production in 2023 was 429,500 sets, down 2.2% year on year. ② Revenue from mechatronic products was 34 million, up 30.78% year on year, mainly due to increased sales volume of harmonic turntable products. The company has grasped the trend of mechatronics, overcome technical barriers such as mechatronics and micro electrohydraulic servos, and developed a new generation of mechatronic products. ③ The revenue of intelligent automation equipment was 0.2 billion, a significant increase over the previous year, thanks to a low base and the smooth advancement of new products such as the company's hydraulic grinding and polishing tools.

Factors such as declining capacity utilization, preferential prices for major customers, and increased cost rates for the period put pressure on profitability in 2023. The company's gross profit margin and net interest rate in 2023 were 41.14% and 23.63%, respectively, down 7.55 and 11.21 pcts, respectively.

The decline in gross margin was mainly due to reduced capacity utilization and preferential batch prices for large customers. ① The company completed a project to expand production of 500,000 precision speed reducers per year. However, in 2023, demand for the company's downstream robots was weak, production and sales of the company's main product, harmonic reducer, fell 25.52% and 17.84%, respectively. The capacity utilization rate declined year-on-year, leading to an increase in manufacturing costs per unit of product. ② Due to commercial considerations, the company gives bulk price discounts to a large number of customers, resulting in a relatively low gross margin for this type of customer business, which lowers the overall gross margin level.

The decline in net profit margin was mainly due to: ① The year-on-year decline in gross margin. ② The cost rate for the period was 16.34%, an increase of 4.15 pcts over the previous year. Among them, the sales expense ratio, management expense ratio, financial expense ratio, and R&D expense ratio were 3.06%, 6.18%, -6.49%, and 13.59%, respectively, +1.74, +0.94, -1.83, and +3.30 pcts year-on-year, respectively. The increase in the sales expense ratio is mainly due to the increase in the company's overseas exhibition expenses, and the increase in the R&D expense ratio is mainly due to the increase in the company's R&D personnel remuneration and investment costs for new product development. ③ Of non-recurring profits and losses, government subsidies were 6.772,800, a year-on-year decrease of 52.19%; gains and losses from changes in fair value and disposal of financial assets were 4.2847 million, a year-on-year decrease of 75.00%.

2024Q1 revenue declined, and demand for industrial robots is still under weak pressure 2024Q1. The company's revenue declined year-on-year, mainly due to the fact that demand for industrial robots is still weak. According to data from the National Bureau of Statistics, the domestic production of industrial robots from January to January 2024 was 120,300 sets, up 4.9% year on year, with a small increase.

2024Q1's profitability continues to be under pressure due to declining capacity utilization and rising costs during the period.

The gross profit margin and net margin were 42.55% and 24.55%, respectively, down 1.80 and 3.29 pcts year-on-year, respectively.

The decline in gross margin is mainly due to the fact that the company completed a production expansion project with an annual output of 500,000 precision reducers in the second half of 2023, but downstream demand did not recover significantly in 2024Q1, so the company's capacity utilization rate declined year-on-year.

The decline in net profit margin is mainly due to: ① Gross margin is under pressure. ② The cost rate for the period was 22.24%, an increase of 7.52 pcts over the previous year. Among them, sales, management expenses, financial expenses ratio, and R&D expenses ratio were 2.78%, 6.13%, -2.37%, and 15.70%, respectively, +0.91, +1.67, +3.08, and +1.87 pcts, respectively.

The increase in the sales expense ratio is due to an increase in sales exhibition expenses and foreign travel expenses; the increase in R&D expenses is mainly due to companies continuing to increase investment in R&D.

The company maintains its first-mover advantage in the field of harmonic reducers, actively cultivates new business growth points, long-term demand for harmonic reducers is improving, and the company's first-mover advantage continues. 1) Long-term demand for harmonic speed reducers is improving. ① In the short term, robots are the company's main downstream demand, and downstream demand for industrial robots was weak in 2023. According to Rui Industrial, domestic industrial robot sales in 2023 were 283,000 units, up 0.4% year on year, and the growth rate slowed markedly, mainly due to the slowdown in investment in other industries other than photovoltaics, automotive electronics, and semiconductors. ② In the long run, rising labor costs and aging continue to drive the replacement of labor by domestic robots. Harmonic reducers continue to benefit as the core basic components of intelligent manufacturing equipment. At the same time, the application field of harmonic reducers has gradually expanded, expanding from industrial robots to various fields such as service robots, CNC machine tools, medical devices, semiconductor equipment, and new energy equipment. In the future, with the rapid development of the mobile robot industry represented by humanoid robots, its demand for harmonic speed reducers will grow by orders of magnitude. 2) Harmonic reducer processing and cross-field expansion barriers are high, and the company's first-mover advantage continues. ① As a leading enterprise in the domestic harmonic reducer industry, the company pioneered the industrial production and large-scale application of harmonic reducers in China, and pioneered the replacement of imported products in the field of harmonic reducers for industrial robots. ② Based on innovative technology research and development such as DNG impact-resistant long-life flexible bearings, a high-strength flexible wheel optimization, ultra-small damping harmonic reducer, etc., the company has developed a serialized ultra-long-life, ultra-lightweight and ultra-compact harmonic reducer. The accuracy maintenance life is at the leading international level, and has characteristics such as large load, high efficiency, and strong impact resistance. The company's harmonic reducer products have a full range of products covering the relevant needs of intelligent robot rotation modules.

The company actively fosters new business growth points. ① The company pioneered the deployment of mechatronic products suitable for different application scenarios in the industry. This type of product has the advantages of high integration, high efficiency, high accuracy and zero gap. At the same time, it achieves full specification coverage in terms of speed, load capacity, and accuracy. Its comprehensive performance indicators have all reached the international advanced level and have gradually been recognized by leading customers in various markets. In 2023, the business accounted for 9.42% of total revenue, an increase of 3.66 pcts over the same period last year. ② In the second half of 2023, the company released the world's original hydraulic grinding and polishing tool, an automated solution dedicated to solving customers' grinding and polishing tasks. The product is an integrated high-precision, high-rigidity, closed-loop floating dynamic control high-end grinding equipment developed based on the company's self-developed miniature electro-hydraulic servo system. The company has established cooperation with leading customers in application scenarios such as casting polishing, additive surface modification polishing, weld polishing, mold polishing, etc., to cultivate new business growth points for the company.

Profit forecasting and investment advice

The company's net profit for 2024-2026 is expected to be 1.01, 1.38, and 183 million yuan, respectively, up 20.52%, 36.42%, and 32.14% year-on-year respectively. Corresponding PE is 202.37, 148.34, and 112.26 times, respectively, maintaining the “buy” rating.