Core views:
24Q1 results are in line with expectations. The company announced that for the first quarter, 24Q1 achieved operating income of 442 million yuan, +1.03% year-on-year; net profit to mother was 42.1728 million yuan, -4.86% year-on-year. 24Q1 gross profit margin was 42.47%, year-on-year -0.99pct; net profit margin was 10.21%, year-on-year -1.57pct.
The recovery in the downstream industry in '24 combined with the release of the company's production capacity, and the growth rate of performance is expected to rise. Mid-term adjustments in the downstream special industry in '23 affected the pace of order placement. It is expected that 24 will end with the adjustment period, and the recovery in demand in the downstream industry will lead to an increase in the revenue growth rate of environmental testing services. In '22, the company increased Yite's capital by 380 million yuan to expand integrated circuit testing and verification capabilities. After equipment installation and commissioning was completed in the second quarter of '24, Yite entered a period of climbing capacity, and revenue and profit are expected to be gradually released.
It also has the ability to inspect complete machines+components in the low-altitude field, and rich experience in the aviation field is expected to benefit as a priority.
According to the company's interactive investor questions and answers, the company's downstream customers cover the field of low-altitude aviation, drones, etc., and provide testing equipment for mechanics, climate, and comprehensive environment, as well as testing services from chips to components to complete terminal products. In addition, according to the official website of Chengdu Suji, the company has high-barrier static testing capabilities in the aircraft field (one of the contents of structural tests to observe and study the strength, stiffness, stress, and deformation distribution of aircraft structures or components under static load).
Revenue from major laboratories grew steadily, and increased capacity utilization in 24 years drove increased profitability. The year-on-year revenue growth rate of the company's Suzhou, Beijing, Chengdu and Xi'an laboratories was 17.4%/10.7%/21.0%/19.0%, respectively; net profit was +13.04%/+76.05%/-29.99%/+17.17%. Affected by demand in '23, Chengdu Laboratory's net interest rate declined, and profitability is expected to recover in '24 as capacity utilization recovers.
Profit forecasting and investment advice. We expect the company's net profit to be 389/495/607 million yuan in 2024-2026. Referring to comparable company valuations, considering the company's performance stability and growth, and the company's production capacity is climbing, the company was given a valuation of 25xPE in 2024, corresponding to a reasonable value of 19.13 yuan/share, maintaining a “buy” rating.
Risk warning. Macroeconomic risks; risk of changes in industry policies; risk of increased market competition; capacity expansion falling short of expectations.