Incident: The company announced its annual report for the year 23, achieving revenue of 6.210 billion yuan (YoY +3.16%), net profit of 750 million yuan (YoY +35.11%), net profit after deducting non-attributable net profit of 692 million yuan (YoY +37.22%), gross profit margin 37.99% (YoY+4.99pct), and net profit margin of 13.98% (YoY+3.16pct).
Comment: Profitability has improved significantly, and it can be expected to actively expand the growth of emerging markets. In 2023, the company pioneered new tracks and achieved market breakthroughs in emerging industries such as commercial aerospace, deep-sea business, new energy, civil communications, and low-altitude economy. In a single quarter, 2023Q4 revenue and net profit to mother were $1,07/155 million (YoY -23.37%/+36.67%), respectively. By product, in 2023, the company's connectors and integrated interconnection products/motors/relays/optical devices achieved revenue of 44.33/12.58/3.26/ 135 million yuan (YoY +14.28%/-16.21%/-9.21%/+8.51%), and the corresponding sub-business gross margin in 2023 was 38.49%/35.26%/46.37%/23.30% (YoY+6.06/+5.81/+4.56/+0.66pct). On the cost side, the company's cost ratio increased by 1.48pct to 22.14% year-on-year during the 23-year period. The company's sales/management/finance/R&D expenses were 2.34/8.92/-0.37/ 11.25% (YoY-0.19/+0.16/+0.87pct), respectively. The company increased investment in the development of key research projects such as integrated transmission interconnection, high-speed data transmission interconnection, and passive optical communication. R&D expenses increased over the same period. In terms of cash flow, the net cash flow from the company's operating activities in '23 was 1,642 billion yuan, an increase of 819.18% over the previous year. The main reason was that the company continued to step up its accounts receivable management efforts and continuously optimize supply chain material procurement and settlement management.
Profit forecast and investment suggestions: Considering equipment modernization and high-end civilian market prospects, combined with the company's leading technology in the field of interconnection products and the leading position in the segment of military connectors and micro motors, and superimposing improvements in the downstream demand boom in the component industry, we expect EPS to be 2.15/2.72/3.27 yuan/share in 24/25/26, respectively, giving the company 23 times the PE valuation in 24 years, corresponding to a reasonable value of 49.40 yuan/share, maintaining a “buy” rating.
Risk warning: orders falling short of expectations, price fluctuations, product delivery risks, etc.