Profitability continues to improve, the number of orders increases, and emphasis is placed on R&D investment. Profit side: 2023 gross margin was 22.34%, +2.26pct year over year. Among them, the gross profit margin of new energy products was 21.05%, +3.31pct year on year, and the gross profit margin of landscape lighting was 26.49%, and +1.75pct year on year. The company's gross margin for the first quarter of 2024 was 24.2%, +7.05pct year on year, and 7.88% net profit margin, +4.9pct year on year. The company's orders in the first quarter of '24 increased compared to the same period of the previous year, revenue increased year-on-year, product gross margin increased compared to the same period last year, and profitability continued to improve. Cost side: The company's R&D investment in '23 accounted for 5.12%, +0.64pct year on year; R&D investment in the first quarter of '24 accounted for 3.89%, +0.42pct year on year. The company continues to increase investment in R&D. The first oil-immersed power transformer digital factory was fully put into operation in '23. The degree of automation of the original production line continued to increase, reducing costs and increasing efficiency, and increasing gross profit margin.
The overseas electricity market is booming, and the company has domestic and overseas two-wheel drive. Facing the growing demand in the overseas electricity market, considering the strategic layout of globalization, the company planned a Mexican production base in 23 to better promote the company's development of new customers in the North American market and enhance the stability and timeliness of the company's supply chain in the North American market. The project is undergoing preliminary work and planning for land acquisition. Meanwhile, in '23, the company built a production base in Malaysia and put into operation, making it the company's first overseas factory. Domestically, the company invested in the construction of a production base in Shouxian County, Anhui in 2023 to expand the company's production capacity for new energy products. The main construction of the project has already been completed, and production is expected to begin in the first half of 2024.
The product structure is continuously optimized, there is broad scope for business development, and equity incentives enhance cohesion. In terms of sales, the company has further increased the expansion of high-quality overseas customers. It has successfully supplied major overseas customers, and the proportion of direct exports of new energy products has increased. In terms of products, the expansion of new energy product categories such as photovoltaic smart box-type substations and all-in-one computers was completed in 23, and successfully expanded from the original core components to complete equipment, achieving a breakthrough from 0 to 1. At the same time, around the “2+X” strategic layout, the company actively lays out new application fields such as vehicle power supplies, vehicle inductors, communication power supplies and energy storage based on energy products and lighting products, and has broad scope for business development. The rapid implementation of equity incentives in 2023, guided by a long-term incentive mechanism, fully mobilizing the enthusiasm and creativity of the company's core personnel, and continuing to release stock options and restricted stock incentive plans for 24 years will further enhance the cohesion of the core team and the core competitiveness of the enterprise.
Investment advice: We expect the company to achieve revenue of 47.17/60.92/7.182 billion yuan in 2024-2026, net profit to mother of 3.54/4.59/545 million yuan, EPS of 0.90/1.17/1.39 yuan, respectively, and PE 21.30/16.44/13.84 times, covered for the first time, giving it a “recommended” rating.
Risk warning: Overseas business expansion falls short of expectations; risk of equity incentives falling short of expectations; risk of large fluctuations in raw materials.