Incident: The company released its 23 annual report and its quarterly report for '24. It achieved revenue of 156.95 billion yuan and 3.803 billion yuan, up 11.46% and 14.06% year on year; realized net profit to mother of 38.70 million yuan and 929 million yuan, up 21.37% and 26.27% year on year, achieving net profit after deducting net profit of 37.03 million yuan and 818 million yuan, up 27.51% and 26.73% year on year, with basic earnings per share of 4.36 and 1.05 yuan.
Over 23 years of comprehensive business growth, 24Q1 revenue and profit remained high: 4Q23/1Q24 achieved operating income of 40.88/3.803 billion yuan, up 13.34%/14.06% year on year, and realized net profit to mother of 1,057/929 million yuan, up 27.75%/26.27% year on year, and 1Q24 revenue and profit growth rate maintained a high level. By business, revenue from electrical connectivity products in '23 was 7.387 billion yuan, up 4.77% year on year, achieving steady growth. Revenue from smart electrical lighting products was 7.902 billion yuan, up 15.37% year on year, achieving growth through the cycle. Revenue from the new energy business was 380 million yuan, up 148.64% year on year.
Gross margin increased sharply in '23, driving net margin improvement: the company's gross profit margin in '23 was 43.20%, up 5.20pct year over year. By business, gross margin for electric connection/smart electrical lighting/new energy products increased by 6.64/3.88/1.82pct, respectively. In terms of the cost ratio for the period, the sales expense ratio increased by 1.14 pct to 6.82% year on year, mainly due to the increase in advertising expenses and marketing investment, the management expense ratio increased 0.43 pct to 3.99% year on year, the R&D cost ratio increased 0.11 pct to 4.29% year on year, and the financial expense ratio increased 0.08 pct to -0.69% year on year. Under the combined influence, the company's net interest rate increased 2.00 pct to 24.62% year over year.
Build a front-end ecosystem with no headlights as the core and promote the construction of decorative channel flagship stores: the company uses smart headlights as the key development direction of the lighting business, focuses on cost-effective product positioning with the Muguang brand, and provides consumers with integrated smart lighting solutions. In '23, Muguang's professional channel without headlights completed systematic marketing network construction work, which has basically covered provincial capitals, most prefecture-level cities and economically developed regions across the country. The company also launched the construction layout of all categories of flagship stores in '23. In '24, it will make every effort to promote construction, actively use new retail models to empower terminal flagship stores, accelerate the all-round construction of a channel service system, and provide consumers with a more convenient and secure purchasing and use experience.
Promote the rapid development of international business through localization: developed countries mainly focus on new energy businesses, build household energy solutions covering optical storage and charging, and continue to develop installer channels. Emerging countries take electronic connectivity as the core, promote product localization, seize the rise of e-commerce in Southeast Asia, and actively lay out emerging e-commerce platforms.
Profit forecast and rating: We expect the company's 24-25 net profit to be 44.21 billion yuan (originally 4.357 billion yuan) and 5.137 billion yuan, respectively, with year-on-year growth rates of 14.2% and 16.2%. The closing price on May 21 corresponds to 24.9 and 21.4 times PE in 24-25. Refer to the comparable company giving the company a 24-year PE valuation (originally 30x in 2023), corresponding to a target price of 148.80 yuan (+21%), maintaining the “better than the market” rating.
Risk warning: Raw material prices fluctuate, new business development falls short of expectations, and weak downstream demand.