Superstar Technology's performance forecast for the first half of 2024: the net profit growth center for single Q2 reached 26.45% 1) The profit growth rate was impressive, and the growth passed through the cycle:
2024H1, the company expects to achieve net profit of 1.091-1.178 billion yuan, yoy +25%-35%; net profit without return to mother of 1.133-1.224 billion yuan, +yoy 25%-35%; in the 2024 single Q2, it is expected to achieve net profit attributable to mother 0.677-0.765 billion yuan, up 18.79%-34.10% year-on-year, with a center of 26.45%; net profit without return to mother is 0.702-0.792 billion yuan, same The comparative increase was +12.91% to 27.49%, and the central growth was 20.20%, which was impressive.
2) Excluding the impact of exchange, business-related profitability is expected to remain strong:
The 2024Q2 revenue growth rate is expected to be around 30% (continuing the Q1 growth trend). Based on the pre-announced net profit center level, it is estimated that the net interest rate for a single Q2 is 20.6%, slightly lower than 0.5pct in the same period last year. Considering the high exchange base for the same period last year, this net interest rate level has shown very strong performance. The main factors are expected to maintain a high level of gross margin and cost ratio optimization:
Gross profit margin: ① The US dollar exchange rate remains high, supporting high gross profit: According to China Money Network, the average spot exchange rate of 2024Q2 (as of 2024/06/28) US dollar to RMB was 7.2420, and 2023Q2 was 7.0187. ② Hedging the impact of tariffs after transferring part of production capacity to Southeast Asia: Superstar laid out the three Southeast Asian manufacturing bases of Superstar Vietnam, Cambodia, and Thailand in the early years, reducing operating risks. As overseas production capacity continues to climb, the negative impact of tariffs on company profits is expected to continue to decrease. The company's gross margin in Q2 2023 was 30.67%. Considering that the RMB exchange rate remains high against the US dollar, the impact of overseas production capacity boosts the company's gross margin level, and the optimization of the cost ratio due to scale effects, we believe that the company's gross margin is expected to remain above 30% in Q2 2024.
Expense rate: The revenue growth rate is improving, and the cost rate is relatively improving: the revenue growth rate has clearly recovered. The scale effect is expected to reduce the cost rate and increase profitability.
Our view: Superstar Technology is a scarce target with high certainty in the short to medium term of the machinery export chain.
Short-term dimension: the core channels in the US have basically ended, and the tool industry has bottomed out and warmed up. The company's Q2 performance growth was impressive, establishing an inflection point in the industry while further reflecting the company's strong competitiveness.
Mid-term dimension: Entering a cycle of interest rate cuts in the future will drive the recovery of US real estate and add certainty to the recovery of the tool industry; part of the tariffs levied by North America will be covered by overseas production capacity, which is expected to make a strong incremental contribution to the gross margin side.
Long-term dimension: Based on the company's flow distribution capacity continuously expanding into new fields (hand tools continue to expand SKU+ power tools continue to advance), power tools have now entered the mainstream 20V voltage circuit and have received endorsements from core channels. The future can be expected
Profit Forecast and Valuation:
In the past year, the tool industry has been dragged down by the US high interest rate environment and channel storage behavior. In the future, as the US enters a cycle of interest rate cuts and channel inventory replenishment, the industry's prosperity is expected to continue to pick up the good trend.
As the export leader in China's tool industry, Superstar Technology is continuously refining its ability to go overseas. The global production capacity layout responds to external risks, and is expected to improve its business quality and continue to increase its market share every quarter. The company's revenue for 2024-2026 is estimated to be 14.084/17.772/22.864 billion yuan, up 28.86%/26.18%/28.65% year on year, net profit to mother of 2.177/2.709/3.351 billion yuan, up 28.67%/24.48%/23.68% year on year. The current market value corresponding to PE is 13.65 /10.96/8.86 X, maintaining a “buy” rating.
Risk warning
Overseas consumer demand fell short of expectations; interest rate cuts fell short of expectations; trade frictions exceeded expectations