Core views
The company's operations were under pressure in 2023 due to a decrease in sales orders for downstream heavy truck power exchange products, market expansion for some products falling short of expectations, delays in overseas communication projects, and price adjustments for major customers. Faced with industry opportunities and challenges, the company continued to optimize its business structure and capacity layout, and actively promoted the implementation of an international management strategy. Since the third quarter of 2023, its performance has gradually recovered. In the first quarter of 2024, the company's revenue increased 41% year-on-year, driven by good growth in NEV products, energy storage and photovoltaic businesses. With the release of demand for the company's new customers, new supporting models, and new targeted products, the company's business is expected to resume good growth as production capacity climbs in overseas factories and the expansion of new application fields such as AI and low-altitude flying vehicles.
occurrences
The company publishes its 2023 annual report and 2024 quarterly report. In 2023, the company achieved revenue of 1,555 billion yuan, a year-on-year decrease of 4.32%; realized net profit to mother of 137 million yuan, a year-on-year decrease of 45.86%. In the first quarter of 2024, the company achieved revenue of 462 million yuan, a year-on-year increase of 40.66%; realized net profit to mother of 41.69 million yuan, an increase of 1.66% over the previous year.
Brief review
1. Overall results in 2023 are under pressure, showing a gradual recovery trend since the third quarter of 2023.
In 2023, the company achieved revenue of 1,555 billion yuan, a year-on-year decrease of 4.32%; realized net profit of 137 million yuan, a year-on-year decrease of 45.86%; realized net profit of 124 million yuan after deduction, a year-on-year decrease of 47.88%. The net cash flow from the company's operating activities in 2023 was 164 million yuan, an increase of 52.14% year over year. The company plans to pay a total cash dividend of 15.75 million yuan in 2023, accounting for 11.51% of net profit attributable to mother in 2023.
The company's overall performance in 2023 was under pressure. The slight decline in revenue was mainly due to a decrease in sales orders for the company's downstream heavy truck power exchange products, falling short of expectations in the market expansion of automotive intelligent connectivity connector products, delays in overseas communication projects, and price adjustments for major customers. Looking at product segments, in 2023, the company's new energy connector revenue was 1,367 million yuan, down 1.98% year on year, communication connector revenue was 106 million yuan, down 31.57% year on year, and other connector revenue was 66 million yuan, up 1.23% year on year. Looking at the subregions, the company's domestic revenue in 2023 was 1,358 billion yuan, down 6.18% year on year, and overseas revenue was 181 million yuan, up 8.07% year on year.
The large decline in profit was mainly due to a decrease in the company's gross margin and a significant increase in expenses during the period. The company's comprehensive gross margin in 2023 was 24.54%, down 2.18pcts year-on-year, mainly due to declining product demand/production and increased market competition. In 2023, the company's three expenses (sales, management, R&D) were 241 million yuan, an increase of 55.45% over the previous year. It was mainly due to the increase in expenses incurred to prepare overseas subsidiaries in the US and Mexico and the domestic Ruikoda base in Taizhou, expand overseas sales teams and overseas sales offices, hire professional institutions to conduct organizational change consulting, and continue to increase R&D investment. In 2008, the company's sales expenses were 38.4 million yuan, up 43.46% year on year; management expenses were 86.45 million yuan, up 116.58% year on year; R&D expenses were 116 million yuan, up 31.41% year on year.
However, on a quarterly basis, the year-on-year revenue growth rates of 2023Q1, Q2, Q3, and Q4 companies were -9.2%, -14.2%, -8.8%, and 11.6%, respectively, and net profit growth rates to mother were -26.5%, -63.4%, -59.1%, and -26.3%, respectively. Looking at single-quarter data, the year-on-year trend showed a recovery trend since the third quarter.
2. Revenue grew rapidly in the first quarter of 2024, driven by good growth in NEV products, energy storage and photovoltaic businesses.
In the first quarter of 2024, the company achieved revenue of 462 million yuan, a year-on-year increase of 40.66%; realized net profit of 41.69 million yuan, an increase of 1.66% over the previous year; realized net profit of 40.78 million yuan after deduction, an increase of 8.10% over the previous year. The good growth in the company's revenue was mainly driven by the good growth of the company's new energy vehicle products, energy storage and photovoltaic products. The company's comprehensive gross margin for the first quarter of 2024 was 24.88%, down 2.54 pcts year on year, but increased by 1.78 pcts month-on-month. In response to fluctuations in raw material prices and customer price cuts, the company actively responded through product upgrades and iterations, improving production efficiency, promoting supply chain cost reduction, and expanding product categories and sales scale. In 2024, Q1's three expenses (sales, management, R&D) were 69.1 million yuan, up 48.69% year on year, including sales expenses of 10.3 million yuan, up 24.37% year on year; management expenses of 29.34 million yuan, up 95.06% year on year; and R&D expenses of 29.47 million yuan, up 27.27% year on year.
3. Optimize the business structure and capacity layout, and continue to expand the international market.
The company continues to deeply cultivate the two core tracks of new energy vehicles and communications, continues to strengthen the upgrading and iteration of products in the fields of new energy vehicles, communications, energy storage, photovoltaics, batteries, charging piles, industry, rail transit, robotics, medical care, etc., while exploring the application of products in the fields of AI and data centers, low-altitude flying vehicles, 5.5G&6G communications and commercial satellites, supercharging systems, medical systems, humanoid robots, etc., and related projects are progressing in an orderly manner.
At present, the company has formed three production bases in China: Suzhou, Jiangsu, Taizhou, Jiangsu, and Mianyang, Sichuan, and two overseas factories, Ricoda in Mexico and Ricoda in the United States. Ricoda in Mexico mainly supports new energy vehicles and energy storage products, while Ricoda in the United States mainly supports the photovoltaic industry, providing photovoltaic connectors and structural products. In 2023, the company obtained a battery connection system product project from a well-known European car company. Ricoda of the United States signed a “sales contract” with a well-known US photovoltaic power generation tracking system provider to provide them with photovoltaic connectors and structural components. The contract amount was 106 million US dollars.
Currently, the company's US plant and Mexican plant are in a phase where production capacity is climbing, and overseas revenue contributed about 50 million yuan in the first quarter of 2024.
4. Profit prediction and investment advice.
The company's revenue declined slightly in 2023 due to a decrease in sales orders for downstream heavy truck power exchange products, market expansion of some products falling short of expectations, delays in overseas communication projects, and price adjustments for major customers. At the same time, profits declined significantly due to falling gross margins and significant increases in expenses. Facing industry opportunities and challenges, the company continues to optimize its business structure and capacity layout, and actively promotes the implementation of an international management strategy. With the release of demand for the company's new customers, new supporting models, and new targeted products, the company's business is expected to resume good growth as production capacity climbs in overseas factories, and the expansion of new application fields such as AI, low-altitude flying vehicles, 5.5G&6G communications, and commercial satellites. In the first quarter of 2024, the company's performance showed a positive trend, and revenue grew rapidly. We expect the company's revenue from 2024 to 2026 to be 2,244 billion yuan, 2,794 billion yuan, and the net profit to mother will be 207 million yuan, 269 million yuan, and 326 million yuan respectively. The corresponding PE is 23x, 18x, and 15x, respectively, maintaining the “increase” rating.
5. Risk warning. Changes in the macroeconomic environment affect demand. NEV connector market demand and communication connector market demand fall short of expectations; market competition has intensified, leading to a decline in the company's product unit price, a decline in gross margin, and a decline in the company's client share; shortages of raw materials and price increases exceeding expectations, leading to higher company costs than expected, causing the company's gross margin to fall short of expectations; industry development in new fields such as AI and data centers, low-altitude flying vehicles, 5.5G&6G communications and commercial satellites falls short of expectations; the company's production efficiency improvement, supply chain optimization and cost control progress falls short of expectations ; Changes in the international environment affect the company's supply chain security and overseas expansion.