occurrences

The company announced full-year 2023 and 2024Q1 results. In 2023, the company achieved revenue of 1,906 million yuan, -15.44% year-on-year, net profit to mother of 278 million yuan, -28.83% year-on-year, and net profit after deducting non-attributable net profit of 245 million yuan, or -27.08% year-on-year. 2023Q4 achieved revenue of 486 million yuan, -18.29% year-on-year, net profit of 0.3 million yuan, or -47.89% year-on-year, net profit after deducting non-attributable net profit of 31 million yuan, or -50.23% year-on-year. In 2023, the company plans to pay a cash dividend of 3.00 yuan (tax included) for every 10 shares and transfer 1 share from the capital reserve fund.

2024Q1 achieved revenue of 478 million yuan, +14.60% year over year, net profit to mother of 63 million yuan, -24.56% year over year, net profit after deducting non-return to mother net profit of 42 million yuan, -28.65% year on year.

Comment:

Samsung & Google & Apple suppliers, Q1 downstream demand drives revenue growth. The company has been deeply involved in the consumer electronics industry for many years, focusing on the aluminum structural parts business, supplying structural parts such as cases, back panels, and middle frames for consumer electronics products such as tablets, laptops, and smartphones. It has a deep technical accumulation and a leading position in the industry. It is the main supplier of Samsung and Google in China, and has been one of Apple's top 200 suppliers in the world for three consecutive years. 24Q1 achieved revenue of 478 million yuan, +14.60% year over year, which is expected to be mainly driven by the increase in sales volume of Samsung Galaxy S24 series phones; gross margin fell to 15.30%, -7.60 pct year on year, mainly due to rising costs such as aluminum ingots compared to the same period last year. On the cost side, the total cost rate for the four 24Q1 items was 4.67%, -2.31pct year on year. Among them, exchange losses decreased year on year, and the financial expenses rate fell to -0.14%, and -1.62 pct year on year. The profit side was affected by gross margin. The net profit margin for 24Q1 was 13.23%, -6.87pct year on year, and net profit to mother was 63 million yuan, -24.56% year-on-year.

The Samsung Galaxy S24 has set off a wave of AI phones, and the “AI+ terminal” may start a new consumer electronics growth cycle. In January 2024, Samsung released the Galaxy S24 series phones. The built-in Galaxy AI, which combines local and cloud AI experiences, attracted market attention. According to Canalys, the 24Q1 Galaxy S24 series shipped 13.5 million units, +35% compared to the previous generation. In the context of the booming development of AI technology, AI empowers various terminals such as mobile phones, PCs, and tablets to bring new opportunities to the development of the consumer electronics industry, and the global consumer electronics industry is expected to usher in new growth points.

Lay out the new energy and automobile sectors and develop a second growth curve. In October 2023, the company was entrusted with the management of new energy and automobile-related businesses and shares invested by Dongnanping Aluminum and Metallurgical Control. It will add sophisticated processing products such as new energy and automotive aluminum profiles and new energy battery cases to achieve diversified operations and enhance profitability and resilience to risks. With the construction and commissioning of the company's related production lines, the new energy and automobile business is expected to become a new growth point for the company's performance in the future.

Profit forecast and investment rating: We believe that the company is in the leading position in the consumer electronics structural parts industry and is expected to continue to benefit from the “AI+ terminal” industry trend. The company is expected to achieve operating income of 27.23/35.04/4.184 billion yuan in 2024-2026, and net profit to mother of 346/4.42/535 million yuan, corresponding PE of 30.01/23.49/19.41 times, covered for the first time, giving it a “buy” rating.

Risk warning: raw material prices fluctuate; demand falls short of expectations; industry competition intensifies