On October 29, Yawei Co., Ltd. released its results report for the first three quarters of 2024: Q1-Q3 of 2024 achieved operating income of 1.491 billion yuan (-1.75% YoY), net profit to mother of 0.102 billion yuan (+1.29% YoY), and net profit of 0.084 billion yuan (-12.04% YoY) after deducting non-return net profit of 0.084 billion yuan (YoY -12.04%). Among them, Q3 2024 achieved operating income of 0.462 billion yuan (-8.82% YoY), net profit to mother 0.036 billion yuan (+10.44% YoY), and net profit of 0.024 billion yuan (YoY) after deducting non-return net profit of 0.024 billion yuan (YoY -17.94%).

CNC machine tool upgrade incentives, the company's product market prospects are broad

In the 2024 “Guiding Catalogue for Industrial Structure Adjustment” newly issued by the National Development and Reform Commission, CNC machine tools were upgraded for the first time from the mechanical category and ranked 49th in the encouraged category. According to statistics from the China Machine Tool Industry Association, new orders for metalworking machine tools increased 3.5% year-on-year from January to August 2024, and the machine tool industry is expected to recover. In the context of the country's general policy of encouraging equipment renewal and transformation and upgrading of the manufacturing industry, Yawei's future product market, with metal forming machine tools as its main business, may be further developed, and the prospects are broad. Yawei's main business includes three major segments: metal forming machine tools, laser processing equipment, and intelligent manufacturing solutions. Among them, the H1 metal forming machine tool business achieved revenue of 0.724 billion yuan in 2024, accounting for 70.38% of its revenue. The main products of its metal forming machine tool business include CNC bending machines, CNC turret presses, presses, etc. In 2024, H1 achieved significant growth in business orders for products such as CNC bending machines and presses.

The breakthrough in servo press orders has increased the expansion of the electrical appliance industry. The company's high-performance servo presses are driven by high-precision servo motors and use full closed-loop control and direct drive technology, which can improve stamping accuracy. They have the characteristics of high flexibility, high efficiency, and low energy consumption. They are widely used in metal forming and processing in the fields of automobiles, white goods, 3C electronics, etc. As an emerging product produced by the company, H1's servo press orders continued to grow rapidly in 2024 in the face of increased market competition, achieving a breakthrough in orders for 1,250 ton servo presses, and its expansion efforts in the home appliance industry continued to increase, so that the first servo press stamping production line was successfully delivered to high-end customers in the home appliance industry. It is expected that in the future, the company will further expand the market for its new products in the home appliance industry.

The results of the two-wheel drive development strategy were obvious. Profitability was steadily improving. During the reporting period, the company insisted on the two-wheel drive development strategy to further promote industrial transformation and upgrading and accelerate the growth of scale efficiency. Its overall business posture improved steadily. In the first three quarters, it achieved net profit of 0.102 billion yuan to mother, an increase of 1.29% over the previous year. In 2024, the company's gross sales margin reached 26.21% (+0.44pct year over year), and the net sales margin reached 5.91% (+0.32pct year on year), all achieved steady growth, and the company's profitability continued to increase; in 2024, the company's sales period cost rate was 20.4% (+2.48pct year over year), of which the sales expense ratio was 8.92% (+1.02pct year over year), and the financial expense ratio was- 0.12% (+0.2pct), R&D expenses rate is 6.71% (+0.73pct year over year). In the future, the company can further strengthen cost control to help further improve profitability.

Profit forecasting

The company's revenue for 2024-2026 is 2.028, 2.213, and 2.427 billion yuan, and EPS is 0.23, 0.37, and 0.51 yuan, respectively. The PE corresponding to the current stock price is 42.3, 27.0, and 19.3 times, respectively, maintaining a “buy” investment rating.

Risk warning

The risk of changes in the macroeconomic environment and the operating environment of related industries; the risk of market competition; the risk of price fluctuations of major raw materials and outsourced components; the risk of declining demand; the risk of technological upgrading and iterative; and the risk of supply of some imported core components.