Core views

In the full year of 2023 and the first quarter of 2024, the company's revenue grew rapidly, mainly benefiting from: ① the company gradually releasing production capacity; ② actively expanding product application areas; ③ increasing the scope of mergers. Affected by product restructuring, the company's gross margin was under pressure.

The company consolidates the advantages of digital printing equipment in the textile field and actively explores multi-industrial application fields: ① Digital printing equipment in the textile sector continues to expand production capacity, improve the industrial chain layout, and continuously launch new products. ② In the non-textile field, the company fully exploits its advantages to expand into multi-industrial application fields of book printing, building materials finishing, and corrugated paper printing.

occurrences

Incident 1

The company achieved revenue of 1,258 billion yuan in 2023, up 40.65% year on year; net profit to mother was 325 million yuan, up 33.83% year on year; net profit after deducting net income of 312 million yuan, up 32.35% year on year. Among them, Q4 achieved revenue of 376 million yuan in a single quarter, up 90.41% year on year; net profit to mother was 86 million yuan, up 51.70% year on year; net profit after deduction was 81 million yuan, up 57.56% year on year.

Incident 2

In the first quarter of 2024, the company achieved revenue of 368 million yuan, a year-on-year increase of 30.23%, net profit to mother of 87 million yuan, an increase of 34.95% year-on-year; net profit after deducting 85 million yuan, an increase of 33.48% over the previous year.

Brief review

The rapid increase in revenue in 2023 was due to the release of the company's production capacity and the increase in the scope of consolidation. Specifically, the digital printing equipment business achieved revenue of 612 million yuan, an increase of 32.44% over the previous year. The main benefit was that the company's “intelligent factory with an annual output of 2,000 sets of industrial digital printing equipment and consumables” was officially put into operation, and the company's production capacity was gradually released. ① ② The ink business achieved revenue of 411 million yuan, an increase of 8.17% over the previous year, mainly due to the increase in the scope of mergers and the inclusion of more subsidiaries (Tianjin Jingli, etc.). ③ Automated sewing equipment and digital printing equipment achieved revenue of 105 million yuan and 63 million yuan respectively, mainly due to the company's rapid expansion of product application areas through epitaxial acquisition of 100% of TEXPA's shares and 51% of Shandong Yingkejie's shares, and the industrial chain was further improved.

Profitability in 2023 is under pressure, mainly affected by product restructuring and increased cost rates for the period

In 2023, the company's gross profit margin and net profit margin were 46.54% and 25.85% respectively, down 0.66 and 1.31 pcts year-on-year respectively.

The decline in gross margin was mainly affected by product restructuring: ① The gross profit margin of the ink business in 2023 was 53.87%, higher than the company's overall level. The business accounted for 32.66% of total revenue, a year-on-year decrease of 9.81 pcts. ② The gross margins of the new automated sewing equipment and digital printing equipment businesses in 2023 were 23.46% and 44.14% respectively, accounting for a combined share of 13.40% of total revenue. The gross margin of these two businesses was lower than the company's overall gross margin level, which lowered the overall gross profit margin.

Net profit margins are under pressure mainly due to: ① The year-on-year decline in gross margin. ② The cost rate for the period was 15.98%, an increase of 0.28 pct over the previous year. Among them, sales, management, finance, and R&D expense ratios were 8.25%, 4.96%, -4.39%, and 7.16%, respectively. The year-on-year increase was +1.90, -1.56, -0.57, and +0.51 pcts, respectively. The increase in sales expenses was mainly due to an increase in export revenue and an increase in technical service fees; the increase in R&D expenses was mainly due to an increase in R&D personnel and an increase in salary expenses.

2024Q1's revenue has maintained rapid growth, mainly benefiting from digital printing equipment accelerating the replacement of traditional printing processes 2024Q1. The company's revenue continues to grow rapidly. It mainly benefits from the company's digital inkjet printing equipment, ink and other product competitiveness and channel strength, which can better meet the personalized and immediate needs of consumers, adapt to the industry's trend of multiple varieties, small batches, zero inventory, short delivery, energy saving and environmental protection, and is in the accelerated replacement stage of traditional printing processes.

2024Q1 Expense control capabilities have improved, and net interest rates have improved significantly

2024Q1's gross profit margin and net profit margin were 45.63% and 23.48%, respectively, -1.93 and +0.82 pcts year-on-year, respectively.

The decline in gross margin was mainly due to changes in product structure, and the gross margin of the newly added automated sewing equipment and digital printing equipment businesses was lower.

The increase in net interest rates is mainly due to improved ability to control expenses. The 2024Q1 company's cost rate for the period was 16.66%, a year-on-year decrease of 1.39 pcts. Among them, sales, management, finance and R&D expenses rates were 6.72%, 5.65%, -2.16%, and 6.44%, respectively, -0.89, +0.19, +0.39, and -1.08 pcts, respectively. This is mainly due to the company's strict cost control, reduction of operating costs, and strengthening budget execution supervision while actively expanding business and investing in R&D.

Consolidate the advantages of digital inkjet printing equipment in the textile field, and actively explore multi-industry application fields. Companies continue to consolidate the advantages of digital inkjet printing equipment in the textile field. ① In terms of production capacity, in 2023, the company's initial public offering project “Intelligent Factory with an Annual Output of 2000 Sets of Industrial Digital Printing Equipment and Consumables” has been officially put into operation, and the production capacity and quality of digital inkjet printing equipment has been further improved. ② In terms of industrial chain support, the company completed the acquisition of the remaining 33% of Tianjin Jingli's shares, and further opened up space to expand the production of ink consumables through its subsidiary Tianjin Honghua Digital New Materials Co., Ltd., thereby improving pricing capacity and market competitiveness. ③ Judging from the promotion of new products, the company launched new strategic products VEGAX5, VEGA9000DI, ix series and EcoPrint digital printing machines to inject new impetus into the digital printing market.

Actively expand equipment space in multiple industrial applications and apply core technology to non-textile fields. Based on the expandability of the core technology of digital printing, the company makes full use of the technology, scale advantages and ink development and production advantages of the core components of inkjet printing to expand digital printing technology from textile printing to multi-industrial application fields of book printing, building materials finishing, and corrugated paper printing. ① In the field of book printing, the company's products have gradually expanded from the core inkjet printing unit of digital book printing equipment to complete machine design and production. They have ultra-high speed variable data transmission and printing capabilities, double-sided printing of books and magazines, and precise tension control technology. The price of supporting ink and equipment is far lower than similar products abroad. ② In the field of building materials finishing, the company has developed and tested printing equipment for various patterns such as decorative textures, marble textures, and wood textures of various materials. It is currently preparing demonstration projects for model house decoration projects, and is actively seeking suitable partners for in-depth promotion and application in the industry. ③ In the field of corrugated paper printing, the company has entered the corrugated packaging digital printing equipment market through cooperation with leading global packaging and carton board production companies and building its own agent channels.

Profit forecasting and investment advice

The company's net profit for 2024-2026 is estimated to be 439, 5.69 million yuan, and 705 million yuan, respectively, up 34.86%, 29.74%, and 23.94% year-on-year respectively. Corresponding PE is 31.85, 24.55, and 19.81 times, respectively, maintaining a “buy” rating.