The 2023 results exceeded our expectations, and the 1Q24 results met our expectations
Revenue in 2023 was 5.957 billion yuan, +39.8% YoY, and net profit to mother was 913 million yuan, +40.8% YoY. Corresponding to 4Q23 revenue of 1,723 billion yuan, +39.1% YoY, +8.3% month-on-month, net profit of 316 million yuan, +30.9% YoY, +56.5% month-on-month, 4Q performance exceeded our expectations, mainly due to exchange earnings and the implementation of government subsidies at the end of the year. 1Q24's revenue was 1.64 billion yuan, +30.7% YoY, -4.7% YoY, and net profit to mother was 230 million yuan, +36.9% YoY and -22.8% YoY, in line with market and our expectations.
Development trends
4Q23 revenue reached a record high, and the volume of large items led to a continuous increase in ASP. The company has entered a new production capacity investment period since 2021. From 2Q21 to 4Q23, it has achieved several quarterly revenue increases, and 4Q23 revenue has reached a record high level. Looking at the product structure, the company began to gradually expand production capacity for medium and large parts in 2020: ASP for aluminum alloy die-castings in 2023 was 22.18 yuan, an increase of 10.92% over the previous year. At the same time, in terms of new orders, the die-casting sector received 90% of the new energy vehicle projects in 2023, of which body structural parts accounted for about 30%, and three-electric systems accounted for about 40%. We believe that medium and large products are the company's main incremental business for medium- to long-term development.
Gross margin continued to improve due to scale effects and yield increases. Net profit margins fluctuated during the quarter due to exchange fluctuations and government subsidies. In terms of profitability, the gross profit margin of the company's main business in 2023 was 29.1%, +2.45ppt compared to the same period, mainly brought about by a decline in shipping costs, a gradual decline in yield and capacity utilization in the oversized business. 1Q24 gross profit margin was 29.7%, still up from 2023. On the cost side, the company's fee rate during the period is easily affected by exchange rate fluctuations. In 2023, exchange earnings were 63 million yuan, and in 1Q24, we forecast exchange losses of about 0.3 billion yuan, which had an impact on the net profit margin during the quarter.
Going overseas is still the focus of the company's medium- to long-term growth. The company has implemented the layout of the North American factory, and the layout of the European factory is being planned. The company has been deeply involved in overseas markets for many years, accounting for about 55% of overseas revenue in 2023 (previously mainly dependent on imports). The company began a gradual layout of the Mexican base in 2016, and the first phase of use was put into use in July 2023. At the same time, construction of the second phase has begun, which mainly produces new energy three-electric housings and body components. In addition, the company has announced plans to build a factory in Hungary to further serve European customers. We believe that the company's global factory layout is expected to help the company achieve deeper coverage of overseas customers, deepen overseas markets, and open up new growth space.
Profit forecasting and valuation
The current stock price corresponds to 17/14 times P/E for 2024/2025. We maintain our profit forecast for 2024/2025, and maintain the outperforming industry rating and target price of 28 yuan. Corresponding to 2024/2025 25/20 times P/E, there is 45.4% upside compared to the current stock price.
risks
The price of upstream raw materials will rise, the price of sea freight will increase, and the risk of exchange rate fluctuations.