Incident: On February 26, 2024, the company announced its 2023 annual results report. It is expected to achieve operating income of 606 million yuan in 2023, +32.67% year over year; achieve net profit of 133 million yuan, +34.62% year over year; achieve net profit without return to mother of 122 million yuan, +36.60% year over year.
Performance growth was in line with expectations, and sales of 3D printing equipment drove growth. The steady growth of the company's revenue and net profit in 2023 was mainly due to increased sales of 3D printing equipment. As a leading additive manufacturing enterprise, the company is committed to providing metal (SLM) additive manufacturing equipment and polymer (SLS) additive manufacturing equipment to customers around the world, as well as 3D printing materials, processes and services. The company has developed more than 20 types of equipment and is equipped with more than 40 special materials and processes, which are widely used in aerospace, automobiles, medical care, industrial molds, etc. In the future, with upstream and downstream technological progress and industrial development, the penetration rate of 3D printing in various industries will continue to increase, which is expected to drive the company's 3D printing equipment sales to continue to increase.
The application of 3D printing in the downstream industry is expanding, and the prospects for a new 3C circuit can be expected. In July 2023, Honor released the MagicV2 folding screen phone, which became the world's first folding flagship with a 3D printed titanium alloy hinge. This is the first time that 3D printing has been used on a large scale in the consumer electronics field, changing the conventional perception of the “multi-variety, small-batch” application of 3D printing in the past. We believe that there are plenty of downstream application scenarios for 3D printing, and the blue ocean market has yet to be discovered. With technology iteration and cost reduction, 3D printing will gradually spill over from the military to the consumer industry, and has great application potential in 3C, automotive, robotics and other industries.
The company actively expands the downstream circuit, and independently innovates to promote more growth for customers. In 2023, the company provided 3D printing equipment for Skywheel Technology, the world's largest titanium alloy bicycle manufacturer, to produce 3D printed parts for titanium bicycles; in January 2024, Japan Golf Design Company's new titanium alloy golf club head designer used Huashu Hi-Tech Metal 3D printing technology, and the application market continued to sink. Furthermore, in 2023, through technological innovation, the company launched two metal 3D printing devices, FS511M and FS350M, which bring more possibilities for new applications of 3D printing in various industries with advantages such as high efficiency, high quality, safety and intelligence, accelerate the mass production process of industrial additive manufacturing, and help the company maintain and expand its competitive advantage.
Taking the lead in overseas markets, leading product cost performance has created an international reputation. As early as 2017 and 2018, the company established subsidiaries in Austin, USA, and Stuttgart, Germany, with a sales network covering more than 30 countries and regions. Also, under the same technical conditions, compared with foreign companies, the company has a clear production cost advantage in mass industrialized large-scale manufacturing. The company will continue to explore overseas markets in 2023. In the future, as the company's international popularity continues to increase, the company's overseas business is expected to contribute new volume.
Raise capital and expand production to seize opportunities and open up the ceiling for growth. The company's capacity utilization rate in 2021 has reached 112.63%, and the current production capacity can no longer meet the needs of rapid business development. The company raised capital in its 2023 IPO and used it for the additive manufacturing equipment capacity expansion project. By the end of December 2023, it had invested 50.04% of the progress. It is expected to be completed in December 2024. After delivery, 381 additional 3D printing devices are expected to be added, which will effectively solve the production capacity bottleneck and help the company expand rapidly.
Investment suggestion: As a leading enterprise in the field of metal 3D printing+polymer 3D printing in China, the company also has independent R&D and production capabilities for 3D printing equipment, materials and software. Considering that the boom in the 3D printing industry continues to improve, downstream applications continue to spill out. With the company's continuous breakthroughs in aerospace, automotive, medical care and consumer electronics, performance is expected to continue to grow rapidly. We expect the company's revenue in 2023-2025 to be 6.06/10.7/1.92 billion yuan, up 32.7%/77.1%/78.8% year on year; net profit to mother is 1.33/2.36/ 369 million yuan, with year-on-year growth rates of 33.9%/77.6%/56.5%. EPS is 0.32/0.57/0.89 yuan, corresponding PE is 76/43/28 times. The initial rating gave an “gain” rating.
Risk warning: macroeconomic downside risk; industry competition increases risk; risk of downstream market expansion falling short of expectations; risk of project construction falling short of expectations; risk of technology route iteration.