Key points of investment
Key points of the announcement: The company released the 2023 annual report and the 2024 quarterly report. The 2023 annual report results were basically in line with the performance forecast, and the 2024 quarterly report fell short of expectations due to equity incentive costs.
In 2023, the company achieved operating income of 5.90 billion yuan, +23.4% year on year, net profit to mother of 380 million yuan, +76.9% year on year, net profit after deducting non-return to mother of 290 million yuan, +251.9% year on year. 2024Q1's revenue was 1.48 billion yuan, +24.9%/-14.9%, and net profit to mother was 68 million yuan, -27.2%/+69.8% year-on-month, respectively. Net profit excluding non-return to mother was 65 million yuan, or -7.8%/+292.4% year-on-month respectively.
The base business is stable, and new business growth momentum is strong. The revenue growth rate of the company's new sensor/air suspension business in 2023 was +45.2%/+174.8%, respectively. The high revenue growth rate of the sensor business came from category expansion and new customer breakthroughs. The air suspension business benefited from the rapid release of the downstream core supporting model Ideal L8 to achieve high production and sales growth. In 2023, the output of Ideal L8 was 120,000 units, +576% over the same period last year.
Among mature businesses, the TPMS business revenue growth rate was +29.4%, mainly benefiting from TPMS's share increase in China and the rapid revenue growth rate. The automotive metal pipe/valve business companies had a high market share and a stable pattern. The revenue growth rate in 2023 was +6.1%/+9.6%, respectively.
The profit recovery of the infrastructure business supported the overall gross profit margin, and the annual profit center rose. The gross margin in 2023 was 27.4%, -0.6 pct year on year. The gross margin of the new business (sensor/suspension) declined year-on-year due to the rise in mass production and market competition. The gross margin of the sensor/suspension business was -3.0 pct/-1.7 pct year on year, respectively. The mature business (automotive metal pipe fittings/valves) business benefited from a year-on-year restoration of gross margin after the epidemic recovery in overseas markets. The gross margin of automobile metal fittings and valves was +4.7pct/+4.9pct year over year, respectively, and the gross margin of the TPMS business was -1.1 pct year over year. The high profit increase in mature businesses hedged the profit pressure of the new business during the mass production climbing cycle. On the cost side, the cost rate for the 2023 period was 19.7%, -1.2pct year on year, mainly due to the scale effect of revenue growth. The net interest rate due to mother in 2023 was 6.4%, +1.9pct year on year. The company passed the profit low in 2022, and the profit center rose significantly.
24Q1 The actual operating conditions were good, and apparent profits were pressured by equity incentive costs. The 24Q1 gross margin of the company was 29.5%, +1.2pct/+3.3pct month-on-month, the period expense ratio was 22.0%, and +2.3pct/+0.0pct compared to the same period, mainly due to the company's calculation of larger equity incentive expenses. At the same time, considering that the company's non-recurring profit and loss occurred in 2023Q1, the actual operating profit in 24Q1 was good, and the gross margin side reflected the trend of the company's profit increase.
Profit forecast and investment rating: Considering that the company is expected to incur large equity incentive charges in 2024, we maintain the company's 2024/2025 revenue forecast of 78/95 billion yuan, and the estimated revenue for 2026 is 11.5 billion yuan, +32%/+22%/+21% year-on-year, respectively; reduce the net profit to the mother in 2024/2025 to 50,000/650 million yuan (previously 57/730 million yuan). The net profit for 2026 is expected to be 82 billion yuan, +33%/+30%/+26% year-on-year, respectively. The corresponding PE was 18/13/11 times, respectively, maintaining the “buy” rating.
Risk warning: The launch of new products fell short of expectations, and the passenger car price war exceeded expectations.