Description of the event

The company released its 2024 quarterly report, achieving revenue of 490 million yuan, an increase of 3.68% over the previous year, and realized net profit of 16 million yuan, a year-on-year decrease of 36.43%.

Incident comments

2024Q1 was affected by short-term demand fluctuations, and the company's revenue structure changed, and profitability declined year-on-year. In 2024Q1, the company achieved operating income of 490 million yuan, an increase of 3.68% over the previous year, and realized a net profit of 16 million yuan to mother, a decrease of 36.43% over the previous year. Gross profit margin and net profit margin decreased year-on-year, mainly due to short-term demand fluctuations. The company's internal product structure changed, operating costs increased over the same period, and gross margin decreased compared to the same period.

2024Q1 has achieved remarkable results in improving quality and efficiency within the company, and the cost ratio has decreased year-on-year during the period. The company's overall expenses rate decreased year-on-year during the 2024Q1 period. The main reason was the year-on-year reduction in R&D expenses, indicating that after the implementation of the company's equity incentives, internal quality and efficiency improvements were remarkable. The R&D cost rate level decreased significantly year-on-year, and the other cost rate situation remained stable. However, the company's 2024Q1 ROA level declined year-on-year. The company's equity incentive target proposed that the return on total assets in 2024 should not be less than 7%, and not lower than the 75th quartile value of the target company or the average in the same industry. There is still room for efficiency improvement in the future.

The company's “two funds” control achieved remarkable results, and the balance of accounts receivable and contract liabilities gradually decreased compared to the beginning of the period. At the end of the 2024Q1 period, the company's accounts receivable balance decreased to 3.227 billion yuan from the beginning of the period, and the inventory balance decreased to 2,925 billion yuan compared to the beginning of the period, indicating that in the context of the State Assets Administration Commission stepped up the “two gold” assessments, the company responded positively and achieved remarkable results.

Profit forecast and valuation: The company is expected to achieve net profit of 6.9, 8.4 billion yuan, and 1.02 billion yuan in 2024-2026, with year-on-year growth rates of 57%, 21%, and 22%, respectively. Corresponding to the market value on May 10, 2024, PE is 27, 22, and 18 times, respectively.

Risk warning

1. Demand is not issued in a timely manner;

2. The risk of production capacity expansion falling short of expectations.