On June 28, integrated die-casting machine leader LK Tech (00558) released its performance report for the 2023 fiscal year (12 months ending March 31, 2024). In the face of the complex and ever-changing macroeconomic situation at home and abroad and the continuous disturbance of uncertain factors, this financial report fully showed the "resilient growth" of the company.
According to the financial report, in the 2023 fiscal year, the company achieved revenue of HKD 5.837 billion, which was the same as the same period last year; gross profit was HKD 1.588 billion, and the gross profit margin was 27.2%; operating profit was HKD 659 million, and the operating profit margin was 11.3%; net profit was HKD 518 million, and the net profit margin was 8.9%, with overall stable performance.
Looking at the income structure, the reason why LK Tech achieved resilient growth in a depressed market is mainly due to the strong recovery momentum of the company's three major businesses. It is reported that the company's die-casting machine, injection molding machine, and CNC machining center businesses showed good growth trends in the second half of the year, and the accumulated revenue of the three major businesses recorded double-digit growth month-on-month, with 12.5%, 10.4%, and 11.9%, respectively, driving the group's overall accumulated revenue to record 12.0% month-on-month growth. At the same time, the group's overall net profit also recorded a 52.3% month-on-month increase, of which the die-casting machine and injection molding machine businesses recorded a 23.8% and 246.4% month-on-month increase, respectively.
While the core financial indicators are growing soundly, LK Tech's total assets have also grown to HKD 10.906 billion, a year-on-year increase of 27.7%, and the group's net cash reached HKD 582 million, in a relatively abundant state.
So, what other growth signals are hidden under the company's financial report?
Injection molding machine business shows strong recovery, three major businesses jointly promote performance growth
Furthermore, in the 2023 fiscal year, LK Tech continued to focus on the die-casting machine business on the one hand, and co-developed the injection molding machine and CNC machining center businesses on the other hand, jointly promoting the three major businesses to unleash a powerful recovery momentum.
As for the die-casting machine, it recorded sales revenue of HKD 4.244 billion within the year. During the period, the company continuously promoted the technology breakthrough of the integrated die-casting parts, which led to an increase in the stickiness of the company's customer base rather than a decrease, providing sufficient certainty for the future business development.
In the 2023 fiscal year, LK Tech launched a 16,000-ton super-intelligent die-casting unit, which provides a possibility for the integrated die-casting structural parts of larger-sized automobiles with a brand-new direct pressing structure, fewer lubrication points, and more sophisticated processes and structures, equipped with advanced and intelligent control systems. During the period, the company also cooperated with a new-generation host manufacturer to launch the world's first 20,000T super-large die-casting machine, planning to achieve integrated die-casting molding for the entire car body and chassis of B-class cars and larger-sized models. In addition, during the year, LK Tech also released the world's first over-ten-thousand-ton double injection process, effectively meeting the market demand for integrated die-casting molding of the entire car body and chassis, as well as the requirements for advanced concepts such as slide chassis.
In addition, to encourage more customers to apply and upgrade product technology iteratively, LK Tech also established the world's largest and unique 'Over 10,000-ton Die Casting Laboratory' during the year, equipped with various experimental equipment of different tonnages, including 3,000T to 13,000T die-casting machines or die-casting islands, 700T extruders, low-pressure machines, and a rich variety of peripheral automation equipment, providing customers around the globe with various aluminum alloy product testing, trial molding, and small batch trial production services.
As for the injection molding machine, LK Tech seized the market demand, accelerated the elimination of old models and the opportunities for going global in the injection molding machine market, driving the income of the injection molding machine business unit to show strong growth, recording a revenue of HKD 1.425 billion within the year, an increase of 19.7% YoY.
In the 2023 fiscal year, LK Tech accurately focused on the four major subdivisions of the injection molding machine business, with income in the automotive and civilian products sectors recording a YoY increase of 12.6% and 11.9%, respectively, while in the medical supplies and stationery sectors, it achieved a leap in growth with a YoY increase of 183.1% and 113.5%, respectively, showing strong growth momentum. In addition, the company launched a 6,000T super-large two-plate injection molding machine during the year, which adopts advanced mold locking and injection systems and has ultra-large mold capacity and ultra-large moving mold stroke, suitable for the production of super-large and deep cavity plastic products, which is being used by overseas customers, further demonstrating the company's strong technical strength in the injection molding machine field.
As for the CNC machining center business, the business unit recorded a revenue of HKD 168 million during the year, also contributing to the overall revenue growth of the company.
Specifically, despite the complex macro environment posing challenges to the industry, LK Tech continued to use the cross-selling strategy of "three in one, customer sharing" during the reporting period, fully leveraging the synergies of the three core businesses to promote the sustainable development of CNC machining centers and contribute to the overall revenue growth of the group.
Innovation research and development + overseas layout jointly drive endogenous and exogenous growth.
It is worth mentioning that from the strategic layout of LK Tech, its determination to achieve "endogenous and exogenous growth" can also be seen.
In the 2023 fiscal year, LK Tech will increase its research and development investment to enhance the company's technical advantages, and diversify its layout to enrich the company's business landscape, jointly promoting the company's performance to achieve steady growth.
Specifically, during the reporting period, LK Tech continued to increase its R&D investment, which increased by 58.3% to HKD 214 million compared to the same period last year. The R&D team also increased by 24.0% to 678 people, expecting to achieve technological breakthroughs and product innovation, ensuring that R&D results can quickly translate into market competitiveness and bring economic benefits to the group as a whole.
At the same time, the company continues to expand diversified businesses to enhance market adaptability. During the period, LK Tech developed an EPC model for general contracting and customized production simulation services. Among them, the group's general contracting EPC model can provide customers with a full range of services from overall plant planning, intelligent water, and electricity integration, centralized feeding to automation solution design; while the customized production simulation, as an innovative business model, can intuitively demonstrate the implementation effect of the production plan. Such models are becoming a key channel for the group's future revenue growth and integration of die-casting processes.
In addition to continuously expanding its business areas, LK Tech's "Globalization 2.0 strategy" in the 2023 fiscal year has also achieved initial success, with overseas market revenue reaching HKD 1.336 billion, a year-on-year increase of 21.9%.
Currently, the company has set up more than 60 sales offices and service centers in more than 20 countries and is continuing to expand its international footprint. Among them, the group has added production bases and sales service centers in strategic regions such as Mexico, India, and North America to strengthen global service capabilities and international brand influence. In addition, the group has also set up a strategic research and development center in Europe to further consolidate its competitiveness in the international market. In addition to deepening traditional markets, LK Tech is also expanding its sales network in new emerging markets such as Thailand, Vietnam, and Latin America to achieve close integration with local markets.
To sum up, it is not difficult to see that it is the above-mentioned strategic layout that has prompted LK Tech to achieve resilient growth in the 2023 fiscal year. In the future, with the continuous efforts of these layouts, LK Tech's performance and valuation are expected to have sufficient power to move to a new level.