Description of the event
The company released its 2023 annual report, achieving full year revenue of 1,732 billion yuan, an increase of 7.79%; realized net profit of 116 million yuan, a decrease of 31.73%; and realized net profit without deduction of 103 million yuan, a decrease of 36.55%.
The company released its 2024 quarterly report, achieving revenue of 372 million yuan, an increase of 7.98%; realized net profit of 0.27 million yuan, an increase of 4.88%; and realized net profit without deduction of 0.26 million yuan, an increase of 18.63%.
Incident reviews
The vehicle chain system is growing rapidly, and the industrial chain has declined. By product, revenue from vehicle chain systems, agricultural machinery chain systems, industrial equipment chain systems, other products, and scrap materials achieved revenue of 10.16, 3.07, 2.76, 0.92, and 40 billion yuan respectively in 2023. The year-on-year growth rates were 23.22%, 10.19%, -24.79%, 42.08%, and -14.26%, respectively. Among them, the industrial chain declined, mainly due to European warehousing affecting the company's OEM related business.
The gross margin declined slightly, and the expense ratio increased. The company's overall gross margin decreased by 0.99 pct to 22.03% in 2023. Among them, the gross margin of the vehicle chain system decreased by 1.62 pct to 24.25%, the gross margin of the agricultural machinery chain system also increased by 0.52 pct to 26.56%, and the gross margin of the industrial equipment chain system decreased by 3.50 pct to 18.19%. In terms of cost ratio, the company's expense ratio also increased by 3.41 pct to 14.91% during 2023, of which the sales expense ratio also increased by 1.21 pct to 3.99%; the management expense ratio increased by 0.64 pct to 5.42%; the financial cost ratio also increased by 0.82 pct to 0.76%; and the R&D cost rate also increased by 0.75 pct to 4.73%. The company's investment in new projects and the increase in cost rates are important reasons for the decline in performance in '23. Looking ahead to '24, the company is expected to strengthen cost control and increase profitability.
Deeply cultivate the field of chain transmission and continue to promote the domestic replacement process of high-end chains. The company continues to deepen its main business, enhance technology accumulation and R&D capabilities, strengthen the introduction and self-research of high-end equipment and instruments, expand high-end plants and infrastructure, comprehensively promote digital transformation, expand production scale, strengthen brand promotion, strengthen specialized advantages, and implement in-depth quality improvement while rapidly increasing the scale of new products, so that the company can further enhance its ability to provide customers with high-quality independent research and development of core chain transmission components, and continue to strengthen the core basic components represented by “engine reinforced toothed chain systems” and “high-power marine engine chains” to replace imports. The company is in the chain transmission industry Its leading position has been further enhanced.
Project construction is progressing steadily, and new production capacity is expected to be released steadily. Looking ahead to 2024, the company will continue to be deeply involved in vehicle chain systems, agricultural machinery chain systems, and expand the field of industrial equipment chain systems, automobile chain systems, agricultural machinery parts, and e-bike chains. The company is steadily advancing the construction of the project. New production capacity such as the Thailand plant and Huzhou plant is expected to be released steadily over the next 2-3 years, and medium- to long-term growth can be expected.
Profit forecasting and valuation
The company's 2024-2026 revenue is expected to be 19.94, 22.69, and 25.36 billion yuan, with year-on-year growth rates of 15.09%, 13.81%, and 11.78%; net profit to mother is 1.55, 1.95, and 237 million yuan, with year-on-year growth rates of 33.87%, 25.50%, and 21.82%. The company's 2024-2026 performance corresponding PE was 13.25, 10.56, and 8.67 times, respectively, maintaining a “buy” rating.
Risk warning:
New business development progress falls short of expectations, policy changes, raw material price fluctuations and other risks.