Incident: The company released its 2023 annual report. The company achieved revenue of 580 million yuan, +10.7% year-on-year, and realized net profit of 180 million yuan to mother, +18.4% year-on-year. Looking at the single quarter of the split, Q4 achieved revenue of 160 million yuan, -6.9% year-on-year, +7.4% month-on-month, and realized net profit of 50 million yuan to mother, +13.9% year-on-year and +20.5% month-on-month. The company's 2024 quarterly report revealed that Q1 achieved revenue of 140 million yuan, +7.6% year-on-month, and -11.8% month-on-month, and realized net profit of 50 million yuan, +1.2% year-on-year and -2.0% month-on-month.
The company's performance grew steadily, and 24Q1 gross margin improved month-on-month. In 2023, the company achieved revenue of 580 million yuan, +10.7% year over year. By product: valve transmission set precision parts revenue was 410 million yuan, +10.0% year on year, valve set precision parts revenue of 90 million yuan, +10.7% year on year, and revenue from other businesses (including other precision parts and cold forged wire processing) was 80 million yuan, +12.6% year over year, and all businesses maintained steady growth. The company's gross margin in '23 was 53.3%, -1.5pp. By product, the gross margin for precision parts of valve transmission units was 56.2%, +3.1 pp year on year, and the gross margin of precision valve components was 68.3%, +1.5pp year on year. The gross margin of other businesses fell 29.2pp to 18.5%, leading to a decline in the company's overall gross margin.
The 24Q1 company's gross profit margin was 51.5%, -8.0 pp year over month, and +2.1 pp compared to the previous month. It is expected that the company's profit level will remain high as the company continues to practice internal skills and reduce the product waste rate.
New orders continued to be received, and overseas markets expanded significantly. In 2023, new projects for various customers such as Volkswagen Global and MAN were mass-produced. The company's overseas revenue was 200 million yuan, +35.5% over the same period, accounting for 34.3% of the company's revenue. Overseas market strength contributed an important increase to the company. Looking at the overseas subsidiaries of the corresponding company, New Coordinates Europe achieved revenue of 90 million yuan, +45.2% year-on-year, while Mexico's new coordinates achieved revenue of 0.3 billion yuan, +93.1% year-on-year. Furthermore, the company's strong product competitiveness helped the company continue to win new orders. In 2023, the company received new project targets from European manufacturers such as Volkswagen, BYD, and Great Wall Motor, laying a solid foundation for future performance growth.
Accelerate the expansion of the wire business and actively develop new products. Huzhou New Coordinate's business improved, and Huzhou New Coordinates achieved revenue of 58.2296 million yuan in 2023, +45.7% over the same period last year. According to the annual report, Huzhou's new coordinates have now provided a stable supply of bearing steel wire to many bearing manufacturers such as Renben and Wanxiang. Customer reviews for use in many different industries are being carried out in an orderly manner, and products are gradually being tested and delivered. The future wire business is expected to accelerate volume and contribute to the company's performance. Furthermore, the company is actively developing the application of precision components in various fields such as automobile transmissions, body stabilization systems, precision solenoid valves, heat pump systems and integrated thermal management modules, hollow motor shafts, precision parts for power battery cases, and precision parking screws. Currently, it has successfully supplied transmission parts for Changan Ford and parts for BYD's body stabilization system, and the company's growth space will usher in new breakthroughs.
Profit forecasting and investment advice. The company's net profit for 2024-2026 is estimated to be RMB 2.1/26/290 million yuan, respectively, and the compound growth rate of net profit to mother for 24-26 is 16.7%, corresponding PE is 14/11/10 times, respectively, maintaining a “buy” rating.
Risk warning: market competition risk, raw material price fluctuation risk, downstream customer sales falling short of expectations, policy adjustment risk, geopolitical risk, etc.