Core views

The company's revenue declined month-on-month in the fourth quarter of 2023 and the first quarter of 2024 due to the annual decline in the industry and seasonal pullback in downstream demand, but the company improved profitability by optimizing the product structure, improving production efficiency, yield, implementing cost reduction, and process optimization. Q4/Q1 removed the impact of credit impairment, asset impairment, value-added tax rebates, government subsidies, etc., and still maintained a net interest rate of 10.5% or more. It is at a historically high level, and profitability is steady.

The company's customer coverage is comprehensive. Overseas factories have reversed losses in the first quarter of 2024, and future performance can be expected.

occurrences

The company released its 2023 annual report: The company achieved operating income/net profit attributable to mother/net profit of 10.5.1/12.0/1.16 billion yuan in 2023, +21.5%/+33.3%/+36.9% year-on-year, higher than the median net profit to mother/net profit after deducting non-return to mother of 1,18/1.05 billion yuan in previous performance forecasts;

Among them, Q4 achieved operating income/net profit attributable to mother/net profit excluding non-attributable net profit of 27.4/4.1/390 million yuan, +2.2%/+33.8% YoY, and -3.8%/+41.8%/+40.2% month-on-month.

The company released its 2024 quarterly report: In the first quarter of 2024, the company achieved operating income/net profit attributable to mother/net profit of 25.09/3.09/295 million yuan, +7.8%/+27.1% year-on-year, and -8.5%/-24.0%/-23.5% month-on-month.

Brief review

By product: In 2023, the company's revenue for lithium battery structural parts was 10.064 billion yuan, with a gross profit margin of 24.14%, year-on-year, and the year-on-year profit decline was mainly affected by operating rate; automobile structural parts revenue was 427 million yuan, +45.1% year over year, mainly driven by Tesla; in new fields, the company invested in the establishment of Shenzhen Kemeng Innovative Robotics Technology Co., Ltd. and signed an “Investment Cooperation Agreement”. It mainly develops and produces harmonic speed reducers for various application fields such as industrial robots, and is expected to begin production in '25 .

By region: in 2023, domestic revenue was 9.98 billion yuan, +18.7%; the company continued to explore overseas markets. The equipment at the first factory in Hungary has reached production, and the Swedish and German plants have been tested for production. Overseas revenue in 2023 was 530 million yuan (including exports), +118% over the same period last year, accounting for +2.3 pct to 5.1% of overseas revenue. Among them, the Hungarian factory has achieved profit. The total profit of the three major overseas factories in Q1 has been achieved.

Looking at the quarter by quarter: The month-on-month decline in the company's Q4/Q1 revenue was mainly due to 1) seasonal changes in terminal demand; 2) annual price cuts lowered revenue, but the company improved profitability by optimizing the product structure, improving production efficiency, yield, implementing cost reduction, and process optimization internally. Excluding the effects of credit impairment, asset impairment, VAT refunds, government subsidies, etc., Q4/Q1 still maintained a net interest rate of 10.5% or more, and profitability was steady.

Investment advice: The company is expected to achieve net profit of 14.14/16.98/2,088 billion yuan in 24/25/26, and the PE corresponding to the current stock price is 17.89/14.90/12.11 times, giving it a “buy” rating.