Incident: The company released reports for the first quarter of 2023 and 2024. For the full year of 2023, the company achieved operating income of 1,060 million yuan, +40.41% year-on-year, realized net profit of 117 million yuan, or -22.32% year-on-year. In 2024, Q1 achieved operating income of 269 million yuan, +16.10% year-on-year, realized net profit of 0.27 million yuan, or -17.31% year-on-year, and realized net profit without deduction of 0.26 million yuan, or -19.39% year-on-year.
Our analysis and judgment:
The boom in the new energy market has helped the company's revenue to grow rapidly, and the launch of new products and overseas expansion are progressing smoothly. Benefiting from the rapid development of the NEV and wind storage markets, the company's revenue increased significantly in 2023, and continued to be booming in Q1 2024. In 2023, the company achieved operating revenue of 5.96/3.45/0.41/0.59/0.18 billion yuan in the fields of new energy vehicles, wind and solar storage, communications, industrial control, and rail transit, respectively, +54.66%/+10.92%/+29.35%. All business areas achieved performance growth. The NEV sector had the highest growth rate. The company's products covered leading companies such as Ningde Era, BYD, Tesla, Wei Xiaoli, Guangzhou Automobile, and Extreme Krypton, which fully benefited from the rapid expansion of the NEV market. In 2023, the company's new products achieved rapid release, encouraging fuses to achieve revenue of 47 million yuan, a year-on-year increase of 213.29%. The unit price of incentive fuses can reach more than 100 yuan, far exceeding the company's traditional products, and is expected to contribute significantly additional increases to the company's performance. In addition, the company's smart fuse products will also be supplied in batches in 2023, leading the trend of upgrading the fuse industry. In 2023, the company also achieved impressive results in overseas market expansion. Overseas revenue of 60 million yuan was achieved throughout the year, +102.01%. Leading overseas car companies such as Tesla and Daimler contributed to revenue growth. Subsequent mass production at the Thai factory is expected to further expand the scale of overseas revenue.
Gross margin is affected by raw material prices, and share payments cause short-term fluctuations in fee rates. In 2023, the company's gross margin was 40.89%, -1.04pct year on year, 2024 Q1, the company's gross margin was 38.04%, -2.83pct year on year, and -3.25pct month-on-month. The decline in Q1 gross margin was mainly affected by rising prices of raw materials such as copper and annual product decline. As revenue continues to grow, the scale effect is expected to offset the decline in gross margin.
In terms of expense ratios, the company's sales/management/financial expense ratios in 2023 were 6.97%/7.77%/0.41%, respectively, and +2.46pct/+1.98pct/+0.58pct, respectively. Of these, share payment expenses affected sales and management expenses of 0.17 million yuan and 023 million yuan respectively. Excluding the impact of share payments, the sales expense ratio was +0.86pct year on year, mainly due to the increase in expenses brought about by the company developing overseas markets. The management expense ratio was -0.20pct year on year. The increase in financial expenses ratio was This is mainly due to the increase in interest expenses due to the increase in the company's short-term loans.
In Q1 2024, the company's sales/management/financial expense ratios were 7.41%/8.86%/0.44%, respectively, +1.02pct/+0.62pct/-0.05pct year-on-year, and +0.20pct/+0.95pct/-0.15pct, respectively. They continued to be affected by the increase in share payment fees, and the pressure to increase financial expenses weakened markedly.
Maintain high-intensity R&D and lead the upgrading trend of the fuse industry. In 2023, the company's R&D expenses were 121 million yuan, +120.53% year-on-year, of which share payment expenses affected 29 million yuan. After exclusion, the R&D expenses rate was +1.37pct to 8.64% year-on-year, continuing to maintain a rapid growth trend. In 2023, the company's R&D personnel increased by 13.45% year-on-year to 253, continuing to expand the strength of the R&D team. The company is developing a number of emerging product projects including 1000V smart fuses, 1000V excitation fuses, lightning protection fuses, energy storage fuses, and new photovoltaic fuses. Leading technical strength helps the company maintain its leading competitive position in the industry and lead the fuse industry upgrading trend.
Investment advice: We expect the company's revenue from 2024 to 2026 to be 1,396/17.47/2,158 billion yuan, respectively, and net profit to mother of 149/2.45/342 million yuan, respectively. The corresponding diluted EPS is 2.25 yuan, 3.70 yuan, and 5.16 yuan respectively, maintaining the “recommended” rating.
Risk warning: 1. Risk of downstream customer sales falling short of expectations; 2. Risk of global market expansion falling short of expectations; 3. Risk of increased market competition.