Description of the event

The company released its 2024 quarterly report. In 24Q1, it achieved revenue of 3.453 billion yuan, an increase of 5.79% over the previous year; net profit of 356 million yuan, an increase of 7.76% over the previous year; after deducting non-net profit of 333 million yuan, an increase of 13.86% over the previous year.

Incident comments

On the revenue side, the company achieved year-on-year growth, which is expected to be mainly due to a recovery in some downstream demand, such as the automobile and electric power industries, which may grow better.

In terms of gross margin, in 24Q1, the company's overall gross margin reached 34.94%, an increase of 0.98 pct over the previous year. It is estimated that gross margin will increase mainly due to improvements in the company's product structure and continuous cost reduction and efficiency.

In terms of cost ratio, in 24Q1, the company's overall four-cost ratio reached 19.34%, an increase of 1.27pct over the previous year. Among them, the sales expense ratio reached 3.12%, up 0.01 pct year on year, the management cost rate reached 10.22%, up 0.8 pct year on year, the R&D cost rate reached 5.16 pct, up 0.67 pct year on year, and the financial cost ratio reached 0.84 pct, down 0.21 pct year on year. Management cost rates and R&D expense ratios contributed to the major increase.

In terms of cash flow, in 24Q1, the company's net operating cash flow reached -242 million yuan, mainly due to a decrease in bill discounts during the reporting period and an increase in wage expenses and taxes compared to the same period last year.

At the end of 24Q1, the company's balance ratio was 36.23%, a slight increase of 0.13pct over the previous year, and remained stable.

In terms of inventory, the company reached 2,332 billion yuan, a slight decrease of 5.13% over the previous year, and remained stable. The total amount of accounts receivable and notes reached $5.564 billion, an increase of 12.7% over the previous year. Overall, it shows that the company's sales volume in the first quarter was good, and industry demand began to rise.

In 24 years, the company fully implemented the “75+” strategy, continued to build a leading edge in relays, step up efforts to “expand categories” strategy, increase efforts to “repair shortcomings”, especially help weak enterprises to achieve obvious efficiency improvements, focus on building a promising industrial chain and process technology research, attach great importance to digital promotion work, implement overseas manufacturing strategies, and further deepen the content of “crossing the threshold”.

We expect that as part of the downstream economy recovers and continues to reduce costs and improve efficiency, the company is expected to continue to grow rapidly under the protection of a firm strategic policy. The company's net profit is estimated at 1.69 billion yuan in '24, which is about 17 times PE. Maintain a “buy” rating.

Risk warning

1. Policy risks in the electric vehicle industry;

2. The risk that profitability falls short of expectations due to increased competition in the industry.