In 2023, the company achieved operating income of 3,861 billion yuan, +3.6% year on year; net profit to mother of 198 million yuan, +27.1% year on year; net profit without return to mother of 149 million yuan, +6.8% year on year. 24Q1 achieved operating income of 1,102 billion yuan, +37% year over year, realized net profit of 81 million yuan, +321% year over year, and realized net profit of 75 million yuan after deduction of non-return to mother.
The company's revenue grew steadily in '23. By business, the revenue of P&S and SMC technology platforms reached the highest record in the same period in history, at 1,975 million yuan/826 million yuan, respectively. MIM was affected by the recovery of the downstream consumer electronics industry and the increase in folding projects from major customers in the second half of the year, and annual revenue rebounded steadily to 1,022 billion yuan, -11.42% year-on-year; the three businesses accounted for 51.65%, 21.6%, and 26.74%, respectively. Downstream: In the downstream P&S business, automotive parts and home appliance parts account for 77.94% and 17.80% respectively; in the downstream SMC technology platform, the photovoltaic sector and the NEV sector account for 49.59% and 14.63% respectively. The global NEV industry, photovoltaic industry, and folding machines all maintained a high growth trend, and the company's three business segments all showed considerable potential for growth.
Overall gross margin maintained an upward trend. The company's overall gross margin in '23 was 22.33%, +0.28pct year-on-year. The gross margin of P&S/SMC/MIM was 23.51%/21.08%/19.19%, respectively, +3.63pct./ -1.30pct./ -3.63pct. The overall gross margin for 24Q1 was 24.03%, +5.26pct.
The advantage of expanding production is the SMC business line, and the layout of multiple MIM production lines. SMC: Zhejiang Dongmu Keda Plant No. 3 was completed, and the first phase of the Shanxi Magnetoelectric Company project was completed and put into trial production, with a production capacity of 70,000 tons/year.
MIM: By setting up a folding screen hinge design and assembly department, the company has built multiple mobile phone hinge module production lines. Currently, it has achieved leapfrog development from folding machine MIM parts to MIM parts+modules.
Technological innovation broadens product application fields. The company has developed process technology for mass production of titanium alloys, opening up a potential growth curve for the MIM business. The company has also developed 4 next-generation high-performance soft magnetic composites, which can effectively improve the efficiency of downstream products and are used in optical storage inverters, new energy vehicles, etc.
The strategic layout is applied to chip inductors and new axial flux motor projects in the field of computing power. In 2023, the company achieved sales revenue of 69 million yuan in chip inductors and soft magnetic materials for server power supplies, and 256,900 yuan in sales revenue for robot joint motors. In the field of motors, the company currently holds 22% of Shenzhen Xiaoxiang Electric Company's shares, and plans to remodel a site in the Ningbo factory to set up an axial magnetic flux motor assembly line. With the explosive growth of the robot market in the future, there is considerable room for growth in the company's motor business.
Maintain a “Highly Recommended” investment rating. Considering that many of the company's businesses have high growth potential, we raised our profit forecast. The company is expected to achieve net profit of 4.17, 5.33, and 664 million yuan in 2024-2026, corresponding to price-earnings ratios of 20.9, 16.4, and 13.2 times, which is highly recommended.
Risk warning: Downstream demand falls short of expectations, penetration rate of new materials is lower than expected, and secondary market fluctuations.