Incidents. The company disclosed the 2023 annual report and the 2024 quarterly report: 1) Revenue for 2023 was 4.805 billion yuan, +17.03%, net profit to mother was 322 million yuan, -15.42% year over year, net profit after deducting non-return to mother was 249 million yuan, -15.08% year on year; of these, 23Q4 single quarter revenue was 1,443 million yuan, -16.80% year on year, net profit to mother 95 million yuan, -94.07% year on year, net profit without return to mother was -57 million yuan, -10.5.30% year on year. 2) Revenue for the 24Q1 quarter was 1,048 million yuan, +17.04% year on year, net profit to mother was 41 million yuan, +31.01% year on year, net profit after deducting non-return to mother was 26 million yuan, 16.89% year on year.
Lithium battery equipment continued to grow, and photovoltaic equipment began to contribute to performance. According to the company's 2023 annual report, in 2023, the company's various laser products and automation equipment continued to grow as a whole, and the profitability of power, sheet metal laser equipment and automation sectors was under pressure. Specifically: 1) Power battery lasers and automation equipment: revenue of 3.68 billion yuan, +10.60% year-on-year; gross profit margin of 31.15%, yoy-1.23pct. 2) 3C consumer electronics lasers and automation equipment: revenue of 611 million yuan, +38.89% year-on-year; gross profit margin 11.97%, yoy-0.02pct. 3) Sheet metal laser cutting equipment: revenue of 150 million yuan, -5.17%; gross profit margin 23.78%, yoy+4.58pct. 4) Photovoltaic industry laser and automation equipment:
Revenue of $149 million, gross profit margin 35.40%. 5) New display industry laser and automation equipment: revenue of 8.68 million yuan, yoy -17.65%; gross profit margin 11.52%, yoy-5.67pct.
Profitability is under pressure, and improvements are expected. 1) According to the company's 2023 annual report, the company's gross margin and net profit margin in 2023 were 29.21%/6.66%, with a year-on-year change of -1.29/ -2.49pct; among them, the gross margin/net interest rate for the 23Q4 single quarter was 24.42%/0.71%, respectively, -1.01/-8.48pct. 2) According to the company's 2024 quarterly report, 24Q1 company's gross margin and net margin were 26.52%/3.60% respectively, a year-on-year change of -4.31/+0.11pct. As the company gradually increases its overseas layout and continuous layout in new technologies and new fields, we expect the company's profitability to improve.
There has been a temporary increase in the fee rate. Since 2023, the company has continued to increase investment in product development, increase overseas business development, continue to carry out management changes, and increase investment in R&D, sales and management. According to the company's 2023 annual report, the company's sales/management/R&D/finance expenses ratio in 2023 was 5.14%/5.73%/11.24%/0.02%, respectively, with a year-on-year change of +0.31/+0.87/+1.19/ -0.63pct. The cost rate for the 23Q4 single quarter was 25.93%, a year-on-year change of +9.99pct. Among them, the sales/management/R&D/finance ratio was 5.75%/6.07%/13.26%/0.85%, respectively, with a year-on-year change of +2.26/+2.26/+5.30/+0.17pct. The 2024Q1 cost rate was 24.99%, a year-on-year change of -2.4pct.
Among them, the sales/management/finance/R&D expense ratios were 5.59%/6.85%/12.11%/0.45%/, respectively. The year-on-year change was -0.46/ -1.59/-0.66/-0.32pct, and the 24Q1 cost ratio improved.
There are plenty of orders on hand, and cash flow pressure is high. 1) According to the company's 2023 annual report, new orders were signed for the full year of 2023 about 4.8 billion yuan (tax included), and by the end of 2023, ongoing orders were about 7.5 billion yuan (tax included). In the first quarter of 2024, new orders were about 850 million yuan (tax included), and the total number of active orders was about 7.1 billion yuan (tax included). On the other hand, at the end of 2023, the company's inventory balance was 4.983 billion yuan, of which 3.374 billion yuan was issued, accounting for 67.71% of the inventory, which also confirmed that the company's orders were sufficient. 2) The company's net operating cash flow in 2023 - 993 million yuan, yoy -303%, is mainly due to tight financial resources from downstream customers and slow sales repayment progress. As the company's on-hand orders are delivered and confirmed one after another, we believe the company's operating cash flow is expected to improve.
Increase overseas layout and layout of new products and fields. 1) Increase overseas expansion: On the one hand, we are steadily promoting overseas market expansion through cooperation with outstanding domestic companies, cooperation with Japanese and Korean battery companies, and the “three-step” strategy of providing integrated equipment solutions to overseas customers; on the other hand, we have accelerated overseas strategic layout. As of March 31, 2024, 8 overseas subsidiaries have been established in Europe, North America, Asia, etc. In 2023, the company had overseas revenue of 119 million yuan, yoy +46.59%; gross profit margin of 44.72%, yoy+6.47pct. 2) Continuous development of new products: In 2024, in the field of power battery lasers and automation equipment, products with industry competitiveness such as micro-concave and double-sided simultaneous coating machines, high-speed die-cutting machines, high-speed laser cleaning machines, high-speed laser marking/drilling machines, and solid-state battery production related equipment will be launched. Actively develop markets in other fields, such as photovoltaics, 3C, medical lasers, etc. Among them, in the field of medical lasers, the company has successfully independently developed and is about to launch a new type of high-power long-wavelength tunable mid-infrared femtosecond laser product. It is currently preparing to apply for Class II and Class III medical device related certificates.
Profit forecasting and valuation. We expect the company's net profit to be 3.86/4.61/556 million yuan in 2024/2025/2026, up 19.8%/19.5%/20.8% year-on-year; EPS will be 1.89/2.26/2.73 yuan. Considering the company's rapid development in both the lithium battery and photovoltaic fields, and the medical laser sector, we gave the company a PE valuation of 18-22 times in 2024, with a reasonable value range of 34.02-41.58 yuan/share (the company's EPS is expected to be 1.89 yuan in 2024), corresponding to a reasonable market value of 69.85 billion yuan, a “superior to the market” rating.
Risk warning. New business expansion falls short of expectations, the risk of declining company orders and performance due to production expansion and reduction, overseas expansion of lithium battery equipment falls short of expectations, increased industry competition, and repayment risks.