Description of the event
The company released its 2024 quarterly report. In 24Q1, it achieved revenue of 248 million yuan, an increase of 32.61% year on year; net profit to mother was 114 million, up 29.4% year on year; net profit after deducting non-return to mother was 111 million, an increase of 28.36% year on year.
Incident comments
Revenue continued to grow at a medium to high rate in a single quarter, and the increase in subsidiary expenses led to slightly lower profit growth than on the revenue side. The company achieved revenue of 248 million yuan in 24Q1, yoy +32.61%. The revenue growth rate for five consecutive quarters from 23Q1 to 24Q1 was mainly due to the continuous growth of the company's batch production and small-batch trial production business, while the gradual implementation of new businesses contributed to revenue. On the profit side, the company's net profit to mother was 114 million, up 29.4% year on year, slightly lower than the revenue side, mainly due to slight fluctuations in profitability. The company's gross margin for the first quarter was 58.76% (yoy-0.44pcts), which remained stable; the cost ratio for the period was 13.73% (yoy+1.24pcts), of which the management fee ratio was 6.53% (yoy+1.08pcts, mainly due to the increase in subsidiary expenses and payment by Shanghai Ruihuasheng Co., Ltd.), and the financial expense ratio was 0.23% (yoy+1.22pcts, mainly due to an increase in interest expenses), which led to a net interest rate of 44.09%, a year-on-year decrease of 2.74 pcts.
With sufficient orders in hand, the company actively prepared goods, and production expansion projects accelerated the promotion of guaranteed order delivery and business development. The company's downstream demand is strong, and there are enough orders in hand. By the end of March 2024, the company's parent company had about 800 million orders for special functional materials, the subsidiary Shenyang Huaqin Hangfa had accumulated signed orders of about 81 million yuan, and had not yet executed orders of about 55 million yuan. In order to ensure the smooth completion of orders, the company actively increased the preparation of raw materials. The inventory balance at the end of 24Q1 was 188 million, an increase of 50.23% over the beginning of the year, a record high. In terms of production capacity, the company's new material park fund-raising project and aviation parts intelligent manufacturing project accelerated. The balance of projects under construction at the end of 24Q1 was 599 million, up 31.17% from the beginning of the year, and the fixed asset balance was 313 million yuan, up 8.53% from the beginning of the year.
The company's new business expansion has successfully opened up a multi-dimensional growth curve, and it is expected to build a flagship platform for special functional materials. In 2023, the company's various new businesses expanded smoothly. As of March 2024, some production lines in Huaquin, Shenyang began the first verification and trial production. As of March 2024, orders of about 81 million yuan had been signed, and orders of about 55 million yuan had not been executed. Intelligent aviation parts manufacturing projects accelerated, and the engineering investment ratio reached 28.88%. At the same time, the company's gross margin of parts processing business is only -6.58%, with reference to peers; Nanjing Huaqin has made business progress in high-end civil fields such as industrial noise reduction and acoustic laboratories, and is actively developing aviation and underwater vehicles Direction follow-up; Ruihuasheng's new materials have been set up, and pre-project construction work has been actively carried out. Currently, the newly established subsidiaries are still in the loss stage due to large upfront investment. It is expected that they will gradually achieve profits in the future as business expansion and scale effects become apparent.
Core recommendation logic and profit forecasting and valuation: The company is one of the few leaders of stealth materials covering the full temperature range in China. Based on the present, the company has significant technological leadership and outstanding industrialization capabilities, and is expected to enjoy exclusive aviation stealth material racetrack boom dividends; looking to the future, the company laterally extends the processing of aviation parts based on material technology, deeply binds downstream customers, and horizontally expands the protection, camouflage and acoustic materials business to create a flagship platform for special materials growth. The company's 24-26 performance is expected to be 521/6.71/884 million, yoy +56%/29%/30%, respectively. The PE corresponding to the current market value is 37, 29, and 22 times, respectively. The possibility of future batch production of downstream models exceeding expectations and raising profit forecasts is not ruled out.
Risk warning
1. The risk of revenue fluctuations due to the pace of order placement;
2. The risk that the profit level will decline due to product price reduction.