Core views
The year-on-year decline in the company's revenue in the first quarter was mainly due to a marked decline in revenue from the small base station business in the connectivity business, while deducting non-net interest rates fell even more, mainly due to the impact of investment income. As the company continues to increase investment in R&D and continuously explore high-end markets in emerging fields and high-quality overseas markets, it maintains strong industry competitiveness in many product lines, and is expected to achieve important breakthroughs. The company's three major businesses are progressing smoothly. Intelligent manufacturing focuses on high-quality markets, senses that the business is in a leading position in the world, and the connectivity business continues to upgrade to the high-end.
The company's high-speed digital optical module products such as 400G, 800G and 1.6T are expanding smoothly at home and abroad, and the performance contribution is expected to increase significantly with future batch delivery.
occurrences
Recently, the company released the 2023 annual report and the 2024 quarterly report. In 2023, the company achieved operating income of 10.208 billion yuan, a year-on-year decrease of 15.01%; realized net profit of 1,007 billion yuan, up 11.14% year on year, realized net profit after deducted from non-return mother was 823 million yuan, up 14.15% year on year; 2024Q1, the company achieved operating income of 2.17 billion yuan, down 18.56% year on year; realized net profit without return to mother of 226 million yuan. , a year-on-year decrease of 18.28%.
Brief review
1. The 2023 performance grew steadily, and the 2024Q1 performance was under pressure in the short term.
In 2023, the company achieved operating income of 10.208 billion yuan, a year-on-year decrease of 15.01%; realized net profit of 1.07 billion yuan, an increase of 11.14% over the previous year, and realized net profit without deduction of 823 million yuan, an increase of 14.15% over the previous year. Among them, the company's sensitive component revenue was 3.248 billion yuan, up 40.02% year on year, and sales in the new energy and upstream and downstream industry chains accounted for more than 60%. The company's PTC product revenue continued to grow, and NTC made a major breakthrough in the automotive field; intelligent manufacturing business revenue was 3.19 billion yuan, down 3% year on year, gross margin was 33.93%, up 1.65 pct year on year; connectivity business revenue was 3.11 billion yuan, down 45.52% year on year, mainly due to the impact of the 5G construction cycle. With 2024Q1, the company achieved operating income of 2.17 billion yuan, a year-on-year decrease of 18.56%; realized net profit of 290 million yuan, a year-on-year decrease of 5.92%; and realized net profit without deduction of 226 million yuan, a year-on-year decrease of 18.28%. The year-on-year decline in the company's revenue in the first quarter was mainly due to a marked decline in revenue from the small base station business in the connectivity business, while deducting non-net interest rates fell even more, mainly due to the impact of investment income. As the company continues to increase investment in R&D and continuously explore high-end markets in emerging fields and high-quality overseas markets, it maintains strong industry competitiveness in many product lines, and is expected to achieve important breakthroughs.
2. The gross margin has increased steadily, and the company continues to increase investment in R&D.
The gross sales margin in 2023 was 23.11%, up 3.95pct year-on-year. The gross margin of the company's three major businesses increased. Among them, the gross margin of sensitive components was 23.99%, up 2.75pct year on year, the gross margin of laser processing equipment was 33.93%, up 1.65pct year on year, and the gross margin of optoelectronic devices was 9.47%, up 0.53 pct year on year. The company's net profit margin in 2023 was 9.78%, up 2.37pct year-on-year, mainly due to the positive impact of the increase in gross margin. In 2023, the sales expense ratio was 5.41%, up 0.35pct year on year, the management expense ratio was 4.04%, up 0.5pct year on year, R&D expenses were 7.34%, up 2.63pct year on year, financial expenses were -1.05%, down 0.34pct year on year. The gross margin of 2024Q1 was 24.83%, up 3.67pct year on year, and the net margin was 13.32%, up 1.77pct year on year. The sales expense ratio of 2024Q1 was 5.7%, up 1.15 pct year on year, management expense ratio was 3.54%, up 0.87 pct year on year, R&D cost rate was 6.43%, up 1.82 pct year on year, financial cost ratio was -1.39%, down 0.75 pct year on year. The company continues to increase investment in R&D, which is expected to guarantee the competitiveness of each product line in the industry.
3. Intelligent manufacturing focuses on high-quality markets, senses that the business is in a leading position in the world, and the connectivity business continues to upgrade to the high-end.
The company is close to market needs and focuses on the three market levels of “intelligent equipment, production line automation, and factory digital intelligence”. The smart equipment business group's Q1 revenue was 409 million yuan, up 16% year on year, and net profit increased 30% year on year; the precision business group expanded into PCB microelectronics, automotive electronics, semiconductors, etc., and overseas business revenue continued to grow. Q1 achieved operating income of 266 million yuan, an increase of 5% year on year, and net profit increased 20% year on year. In the sensing business, PTC products fully cover domestic and joint venture brands of new energy vehicles. Revenue from automotive NTC sensor products increased by more than 50% year-on-year, and non-temperature sensors such as pressure sensors, temperature and pressure integrated sensors, and air quality sensors continued to develop rapidly. The decline in connectivity business is mainly due to the continued decline in demand for small base stations, but the company's 400G, 800G, and 1.6T high-speed digital optical module products are expanding smoothly at home and abroad. The products are highly competitive, and the performance contribution is expected to increase significantly with future batch delivery.
4. Profit prediction and investment advice: The company's school-enterprise reform unleashes enterprise vitality, optimizes decision-making processes and improves efficiency. The company's optical module products are expected to break through the overseas high-speed digital communication market and provide the underlying high-speed network connection for AI development. The company's NEV sensors and thermal management systems are expected to increase emissions along with NEV penetration rates. The company leverages its collaborative advantages, and the intelligent manufacturing business is expected to achieve revenue growth and efficiency improvement. We expect the company's revenue for 2024-2026 to be 12.339 billion yuan, 14.673 billion yuan, and 17.283 billion yuan, respectively, and net profit to mother will be 1,309 billion yuan, 1,677 billion yuan, and 1.935 billion yuan respectively. The current market value corresponds to PE 24X, 19X, and 16X, giving it a “buy” rating.
Risk analysis
Investment in cloud computing and 5G fell short of expectations, and products such as optical modules and small stations in the company's connectivity business were affected; the company's high-speed optical module products can be used for low-level hardware facilities in the AI field. If AI development falls short of expectations and the company's customer breakthroughs and progress falls short of expectations, it will affect the development of the company's optical module products; the development of the company's new energy vehicle sensing business falls short of expectations, PTC's past growth rate has been rapid, and revenue share has gradually increased. If the laser industry falls short of expectations, the company's laser processing equipment revenue will be affected The impact; increased competition and declining gross margin; changes in the international environment; the company is subject to overseas regulation and restrictions; the company's overseas expansion of optical modules falls short of expectations, etc.