Incident: In 2024, the company achieved revenue of 2,075 billion yuan, +15.8% year-on-year; net profit to mother was 221 million yuan, +29.4% year-on-year.
2024Q1 performance was in line with expectations, and various businesses progressed steadily. At the industry level, 2024Q1 domestic passenger car sales volume was -28% month-on-month, with new energy sales -34% month-on-month and heavy truck sales +33% month-on-month.
The company's 2024Q1 revenue was -5.8% month-on-month, and net profit was -2.5% month-on-month. The performance is expected to be better than the industry. The main benefits are: 1) passenger car gears (accounting for 52% of revenue in 2023) are full of orders, and export projects such as Bunche Peugeot Citroen are steadily climbing; 2) increased heavy truck sales and increased share of high-value AMT projects; 3) increased contributions from new businesses such as Minsheng Gears and Speed Reducers.
Gross margin increased year-on-year, and cost control was effective. The company's gross profit margin in 2024Q1 was 22.7%, +1.9/-1.9PCT month-on-month. Considering the company's cost reduction and efficiency and increasing scale effect, we expect the gross margin of the company's main business (excluding steel trade business) to remain on an upward path. The total cost rate during 2024Q1 was 9.9%, or -0.6/-2.2PCT. Among them, the management cost ratio was -0.5/-1.2PCT month-on-month, and the R&D cost ratio was +0.7/-0.7PCT. The company's cost control was very effective.
With the expansion of production capacity and the launch of reducer products, the company has sufficient potential for subsequent growth. 1) New energy transmission gears. By the end of 2023, a production capacity of 5 million units has been built, and subsequent export projects such as headquarters, Jiaxing, and Bunche are still progressing; 2) The industrial robot industry has large space, domestic brand substitution trends are remarkable, and the localization rate of core components is expected to increase rapidly. The company's Huandong Technology's domestic RV reducer market share continues to increase, and harmonic speed reducers have also been supplied. In March 2024, the company announced that it plans to split Huandong Technology and go public on the Science and Technology Innovation Board. After the spin-off is completed, the company's shareholding structure will not change, and it still has control over Huandong Technology.
Profit forecast and valuation: The company's net profit for 2024-2026 is estimated to be 10.5/12.9/1.57 billion yuan, corresponding to PE of 20/16/13 times, respectively, maintaining a “buy” rating.
Risk warning: Continued macroeconomic downturn has led to poor industry demand, RV reducer technology risks, and adverse risks of new customer expansion.