Incident: The company released its 2023 annual report. In 2023, the company achieved operating income of 1.95 billion yuan, a year-on-year increase of 32.2%, and achieved net profit of 180 million yuan, a year-on-year decrease of 13.9%; Q4 achieved operating income of 610 million yuan, an increase of 53.2% over the previous year, an increase of 20.1% over the previous year, and realized a net profit of 0.3 billion yuan, a year-on-year decrease of 29.0% and a year-on-month decrease of 46.6%. The company's 2024 quarterly report revealed that 24Q1 achieved operating income of 550 million yuan, a year-on-year increase of 44.2%, a year-on-month decrease of 10.7%, and realized net profit of 80 million yuan, an increase of 84.2% over the previous year and an increase of 146.9% over the previous year.
23Q4/24Q1 gross margin continued to improve month-on-month. The company's gross profit margin in '23 was 31.1%, -3.5pp. Looking at corresponding products, the gross margins of synchronizer/ integrated gear/ differential/ aviation parts were 28.1%/-1.9%/47.6%, respectively, -1.0pp/+2.8pp/ -5.8pp/ -16.7pp. Looking at a single quarter, 23Q4 gross margin was 32.8%, +1.0pp, month-on-month. Benefiting from the release of production capacity in the company's automobile business, the company's gross margin has continued to improve over the past 24 years. The Q1 gross profit margin was 36.0%, +4.1pp compared to the previous year, and +3.2pp compared to the previous month. The subsequent improvement in gross margin brought about by the scale effect will further support the company's profit growth.
The differential business is growing rapidly, and new profit growth points are being actively cultivated. In '23, the company rapidly released differential products and achieved revenue of 270 million yuan, +124.5% over the same period last year. On the customer side, the company has carried out many collaborations with customers such as BYD, Magna, Geely, Schaeffler, Borg Warner, Huichuan, United Electronics, NIO, and Ideal on differential products for new energy vehicles, which have basically achieved full coverage of NEV manufacturers. Looking ahead to 2024, with the completion of the commissioning of the differential shell casting production line and mass production, the sales scale and share of differential assemblies is expected to increase rapidly in 2024. In addition, the company is speeding up the construction of production capacity production lines for hollow motor shafts for new energy vehicles and high-precision coaxial planetary reducers. Currently, some equipment for the 23 year investment to build 2 million hollow motor shafts for new energy vehicles has been put in place and installed and commissioned one after another. Along with the commissioning of subsequent projects, the company's supporting capacity is expected to improve rapidly and become a new profit growth point for the company.
The export business has achieved impressive results, and the aviation business is progressing comprehensively. The company's export business grew rapidly in '23, achieving revenue of 240 million yuan, +53.0% year-on-year, accounting for 14% of the company's main auto parts business revenue. Currently, the company is an exclusive global supplier for various Magna (Europe) and ZF projects, and exports to Germany, France, Slovakia, Italy, Brazil, Turkey and other countries. Based on the company's good trusting relationships with well-known customers such as Magna, ZF, and GFT, it is expected that the company's global competitiveness will continue to increase. In terms of aviation business, the company achieved revenue of 220 million yuan in '23, +14.9% year-on-year. Furthermore, the plant provided by the company for Hao Yiqiang in the Chengdu Economic Development Zone has been mass-produced in '23; the Xindu Aviation Industrial Park aviation parts R&D and manufacturing project has initially formed production capacity. In the future, with the gradual implementation of more new projects and the further expansion of civil aviation business, aircraft modification business, and commercial space business, the scale of the aerospace parts business is expected to continue to expand.
Profit forecasting and investment advice. The company's 2024-2026 EPS is expected to be 0.70/0.83/1.05 yuan, and the three-year compound annual growth rate of net profit is 31.24%, maintaining a “buy” rating.
Risk warning: the risk of fluctuating raw material prices, the risk of a sharp decline in profit margins due to OEM price cuts, and the risk that new business progress falls short of expectations.