Description of the event
The company released its 2023 annual report, achieving full year revenue of 3,529 billion yuan, a decrease of 22.04%; realized net profit to mother of 194 million yuan, a decrease of 41.96%; and realized net profit without deduction of 65 million yuan, a decrease of 71.86%.
The company released its 2024 quarterly report, achieving revenue of 856 million yuan, a decrease of 24.27%; realized net profit of 59 million yuan, a decrease of 51.46%; and realized net profit without deduction of 38 million yuan, a decrease of 64.03%.
Incident reviews
The downturn in consumer electronics and international trade frictions combined to put pressure on the company's 2023 performance.
In 2023, due to factors such as the international environment, geopolitics, and weak investment in downstream equipment, overall demand in the machine tool industry weakened. The 3C sector of the company's dominant business was greatly affected by the decline in consumer electronics and international trade frictions, so revenue and performance declined.
Consumer electronics is expected to gain ground and the company is expected to benefit. On the one hand, shipments from the company's leading product drilling and milling processing center increased by more than 120% year on year; on the other hand, from January to April 2024, the domestic market shipped 91.486 million mobile phones, up 12.3% year on year. Of these, shipments in April alone reached 24.071 million units, an increase of 28.8% year on year.
The new growth engine in the middle and high-end sector is gradually gaining strength. The company's newly established second division has orders of nearly 50 million yuan for high-end new products from Taiwan and South Korea in the first year; over 20 million yuan in the first year for high-end new products that target Japan's Youshang; and the newly formed New Energy Task Force has expanded the number of customers to more than 160.
The demand to update existing equipment is also expected to drive the company's performance upward. On April 9, 2024, the Ministry of Industry and Information Technology issued the “Implementation Plan for Promoting Equipment Renewal in the Industrial Sector”, which focuses on promoting the upgrading of machine tools that have been in service for more than 10 years in the industrial machine industry. With the support of favorable national policies and the improvement of the economic environment, demand for upgrading and replacing CNC machine tools will continue to be released, and the company's performance will steadily improve.
Looking ahead, titanium alloy/AI applications/wearables are expected to bring new growth points. As titanium alloy materials gradually penetrate into major mobile phone brands and product types at home and abroad, it is expected that the growth space for the company's drilling machine products will continue to open up. At the same time, the “2023-2024 White Paper on the Development of China's Technological Consumer Electronics Industry” argues that consumer electronics, as a carrier terminal for AI+ applications, should start a new cycle. Counterpoint predicts that the global AI phone penetration rate will be about 4% in 2024, and the shipment volume is expected to exceed 100 million units; in 2027, the global AI phone penetration rate will be about 40%, and the shipment volume is expected to reach 522 million units, which is expected to drive demand for equipment. At the same time, the smart wear market, represented by Apple MR, is also expected to explode, fueled by AI.
Profit forecasting and valuation
The company continues to consolidate its scale advantage and market share in the general equipment field and 3C field, and is actively expanding its efforts in the high-end field and new energy sector. The company's revenue forecast for 2024-2026 is 49.05/57.74/6.572 billion, with year-on-year growth rates of 38.98%/17.71%/13.82%, respectively; the estimated net profit to mother is 4.95/6.1/73 billion yuan, with year-on-year growth rates of 154.46%/23.26%/19.65%, respectively. The company's 2024-2026 performance corresponding PE was 21.14, 17.15, and 14.34 times, respectively. It was covered for the first time, and a “gain” rating was given.
Risk warning:
Consumer electronics recovery falls short of anticipated risks; new technology expansion falls short of anticipated risks; competition intensifies risks.