Key investment points: The company announced that its wholly-owned subsidiary Langfang Zhenhua plans to invest in the construction of the second phase of the project. The total investment of the project will not exceed 600 million yuan, of which 500 million yuan will be invested in fixed assets. The project construction period is expected to be 24 months.
Relying on location advantages, we will strengthen the supporting capacity of neighboring OEMs such as Xiaomi and Ideal to avoid production capacity bottlenecks. According to the company's announcement, the second phase of the project to be invested in construction will expand its production capacity in the sub-assembly business and add production capacity for stamped parts and thermoformed parts. Relying on its advantageous location, it will be able to support new production capacity in the region for customers such as Xiaomi, Ideal Auto, and BAIC. Since the launch of the Xiaomi SU7 on March 28, its order performance has continued to be intense. By the end of May, a total of 15,688 vehicles had been delivered. It is expected that more than 100,000 units will be delivered in 2024, which will sprint to 120,000 units. As the production and sales of Xiaomi cars continue to increase, the company, as one of Xiaomi's core suppliers, is expected to avoid production capacity bottlenecks and support the company's long-term growth.
New energy empowers the traditional stamping parts business, and new production capacity releases supporting capacity and enhances the growth of the division business. The company achieved revenue of 2,317 billion yuan in '23, +23.19% year-on-year, and achieved revenue of 490 million yuan in 24Q1, +15.95% year-on-year. By product, in 2023, the company's stamping parts business achieved revenue of 1,272 million yuan, +7.62%; the split assembly processing business achieved revenue of 591 million yuan, +64.59%; the selective precision electroplating processing business achieved revenue of 153 million yuan, +14.19% year over year; and the mold business achieved revenue of 128 million yuan, +39.85% year over year. Revenue increased significantly. Among them, new energy customers such as Tesla and Ideal brought new volume to the traditional stamping parts business; Ningde Zhende and Zhengzhou Junrun gradually released production capacity, the number of supporting customers gradually increased, and the split assembly business rose sharply; at the same time, the precision electroplating business is steadily rising, and it is expected that new business lines and customers will be expanded in the future to create new growth poles.
Profitability continues to improve, and cost levels have remained stable. 23. The company achieved a gross profit margin of 25.07% for the whole year, +9.67pct year-on-year.
By product, the gross profit margin of the stamping parts business was 8.57%, +5.20 pct; the gross profit margin of the split assembly business was 41.57%, +8.17pct year on year; the gross profit margin of the selective precision electroplating processing business was 79.42%, -2.11 pct year on year; and the gross profit margin of the mold business was 4.14%, -5.72 pct year on year. 24Q1 achieved gross profit margin of 25.53%, +0.46pct year over year. The profit side mainly benefits from the decline in upstream raw material prices, the increase in the share of high-margin sub-assembly business, and the release of production capacity brought about large-scale effects, which together contributed to the increase in gross margin. In terms of expenses, the total cost of the company's four fees in '23 was 8.24%, -0.19ct year on year, and the total four fees for 24Q1 was 9.01%, +0.00pct year on year. The cost rate remained stable at a low level during the period.
The profit forecast was lowered and the “buy” rating was maintained. The company's traditional business continued to grow with SAIC Motor and new energy customers such as Tesla, Ideal, and Xiaomi, and the new electroplating business opened a second growth pole. Considering the impact of the reduction in sales expectations of some of the company's customers, we slightly lowered the company's 2024-2025 net profit forecast to RMB 357/426 million (previous value was RMB 3.70/490 million yuan) and added the 2026 forecast of RMB 518 million, corresponding to the current PE of 13/11/9 times. Referring to comparable companies, the average PE in 2024 was 19 times, and there is still room for 49% increase to maintain the “buy” rating.
Risk warning: Investment progress is uncertain, downstream customer sales fall short of expectations, new customer development falls short of expectations, etc.