Description of the event
The company released its 2023 annual report and 2024 quarterly report. For the full year of 2023, we achieved operating income of 487 million yuan, up 1.32% year on year, and realized net profit of 130 million yuan, up 16.35% year on year, and realized net profit of 105 million yuan after deduction; in the fourth quarter of 2023, we achieved operating income of 119 million yuan, -3.84% year on year, and -4.83% month on month. Achieved net profit of 0.29 million yuan, up -3.93% year on year; achieved operating income of 100 million yuan in the first quarter of 2024, up -12.24% year on year, and -15.65% month on month. Achieved net profit of RMB 0.18 million, a year-on-year increase of -61.76%. Profit margins are under pressure due to rising raw material prices.
2024Q1 gross margin of 37.06% (42.50% in 2023, 41.86% for 2023Q1), and the net margin for 2024Q1 is 18.60% (27.03% in 2023, 41.19% for 2023Q1).
Incident reviews
The performance of industrial control connectors is under pressure in the short term, and new application scenarios are gradually gaining strength. In 2023, the revenue of industrial control connectors was 267 million yuan, a year-on-year increase of -14.19%. In 2023, the pace of economic growth and the recovery in market demand slowed. Furthermore, global economic uncertainty has increased, and export markets are not very prosperous. At the same time, the company's industrial control connector performance is under pressure due to multiple factors such as the impact of cyclical adjustments in the industry, fluctuations in market demand in the industrial automation industry and increased pressure on industry competition. As a leading domestic industrial control connector, the company will fully benefit from the acceleration of the domestic substitution process in the industrial sector in the future. In addition, the company is actively expanding new application scenarios, grasping the needs of market segments such as robots, household medical devices, and intelligent buildings, increasing the supply of diversified applications, and enhancing the profitability and resilience of the company's industrial control connectors to market fluctuations. Industrial robot control connectors such as WAFER series connectors and WD series wire-to-board connectors have now been mass-produced.
Automotive connectors are the core business support for the company's performance growth in recent years, and high-frequency and high-speed products enhance the certainty of future performance. In 2023, automotive connector revenue was 120 million yuan, up 39.9% year-on-year.
The company continues to focus on medium- and low-voltage signal segments to accelerate and follow up the rapid growth of the NEV industry.
At the same time, the company is actively grasping the market opportunities for intelligent driving of new energy vehicles. Through its holding subsidiary Weikang Automobile, the company has completed key product development product lines such as intelligent driving smart cockpit systems, autonomous driving systems, etc., including intelligent driving front-end visual perception, vehicle body domain control PCB board end connection solutions, Type-C connector components with a vehicle waterproof rating above IP68, and high-speed Ethernet connector components.
New energy connectors are the company's key business development and important strategic development direction, forming a new energy layout covering all three fields of optical storage and charging. In 2023, the revenue of new energy connectors was 93 million yuan, an increase of 22.99% over the previous year. The company continues to expand the connectors required for household and commercial energy storage and charging applications, providing solutions for photovoltaic energy storage systems, forming comprehensive coverage in the three fields of optical storage and charging, and strengthening the new energy connector business layout.
Investment advice
It is estimated that in 2024-2026, the company's revenue will be 55/ 673/888 million yuan, respectively, 14.0%/21.2%/27.6%; net profit to mother will be 1.07/1.37/ 185 million yuan, respectively, -18.3%/28.8%/34.6%, corresponding EPS of 0.97/1.25/1.68 yuan. Based on the closing price of 40.25 yuan on May 6, 2024, the 2024-2026 PE was 41.5X/32.3X/24.0X, respectively.
Considering that the company is a leading supplier of connectors in the field of industrial control, and is also continuing to increase investment in R&D of automotive connectors and new energy connectors, the company will continue to benefit from the “industrial+automobile+new energy” trinity layout in the future. Maintain a “buy-A” rating.
Risk warning
Downstream growth falls short of expectations; customer introduction falls short of expectations; new product development falls short of expectations; risk of fluctuations in the international macroeconomic and political situation.