Performance is in line with expectations, and the growth rate of high-end products is impressive
The company's total revenue in 2023 was 670 million yuan, up 6.3% year on year, net profit to mother was 108 million yuan, up 16.7% year on year, and net profit after deducting non-return to mother was 60 million yuan, up 27.6% year on year. Non-recurring profit and loss mainly came from financial management income from own funds and idle raised funds. The company disclosed results in line with previous forecasts and in line with market expectations. Q4 alone achieved operating income of 200 million yuan, down 8.5% year on year, net profit of 40 million yuan, down 5.8% year on year. Our judgment is that (1) in Q4 2022, the Ministry of Education issued two major documents on expanding education investment and interest-rate loan policies to stimulate colleges and universities to purchase scientific instruments, leading to a high base; (2) the company's new products are still being promoted; (3) downstream demand is under phased pressure. By product, the growth rate of the company's high-end products and new products was impressive in 2023: (1) the company's high-end and high-resolution digital oscilloscopes accounted for 54% of total oscilloscope sales revenue, an increase of 13 pct over the previous year, and (2) the sales revenue of DHO series products increased 194% year on year. (3) Sales revenue of RF instruments increased 14% year on year, faster than the company's overall revenue growth. Looking ahead to 2024, the electronic measuring instrument industry is expected to benefit from the rollout of large-scale equipment renewal policies, the company's own promotion of new products such as 8/13 GHz oscilloscopes, the implementation of new production capacity in Malaysia, and an increase in performance growth.
Benefiting from high-end products, gross margin is rising steadily
In 2023, the company achieved a gross sales margin of 56.5%, a year-on-year increase of 4.1 pct, a net sales margin of 16.1%, and a year-on-year increase of 1.4 pct. Benefiting from the increase in the share of high-end new products, the gross margin continued a steady upward trend. Among them, the gross margin of digital oscilloscope products was 58.3%, an increase of 3.3 pct over the previous year. High-end and self-developed core technology platform products significantly contributed to the gross margin of digital oscilloscopes. The company's expense ratio for the 2023 period was 46.3%, up 1.4pct year on year. Among them, sales/management/R&D/finance expenses were 15.8%/9.5%/21.3%/-0.3%/-0.3%, respectively, with year-on-year changes of -0.9/-0.7/1.4/1.7pct, respectively. As the company continues to increase investment in R&D, the cost ratio has increased during the period. With the optimization of future product structures and the release of scale effects, there is still room for improvement in profitability.
The domestic and foreign layout is perfect, and the leading electronic measuring instrument company has transformed into a comprehensive solution provider. The company has new production capacity and new business layout at home and abroad, contributing to medium- to long-term growth: ① Malaysia project:
It is expected to be put into use in May 2024. After delivery, it will have an annual production capacity of 80,000 units of various electronic measuring instruments, adding an average annual revenue/net profit of 31/029 million yuan. ② Xi'an R&D Center Project: Completed in March 2024. Taking advantage of Xi'an's talent gathering advantages, it focuses on key technologies related to process design of high-frequency band, ultra-wideband microwave RF instrument components and wireless communication protocol analysis. ③ Shanghai Lingang Industrial Park: R&D and production of on-site measuring instruments (modular instruments, test boards, test cabinets, etc.) for use in communications, industrial electronics, consumer electronics and other industries, still under construction. Comparable to the company's modular instrument leader, NI, earned 11.5 billion yuan in 2022, and there is plenty of room for long-term growth. ④ M&A of Beijing Naishu Electronics: In January 2024, the company issued an announcement to acquire 100% of Beijing Naishu Electronics's shares by issuing shares and paying cash, with the aim of improving the company's ability to provide overall solutions. Naishu Electronics had revenue of 51.96 million yuan in 2023, net profit of 19.05 million yuan, net profit of 36.7%, and according to performance promises, the total contribution of Naisu Electronics 2024-2026 was not less than 87 million yuan, no less than 15 million yuan per year. It itself is excellent in quality. Subsequent mergers and acquisitions and business synergy effects between the two parties are expected to create new growth points.
Profit forecast and investment rating: The company's performance growth rate has slowed due to the advance demand for education subsidies in 2022, the slowdown in demand for renewal of downstream enterprises, and slower than expected promotion of new products. Due to prudential considerations, we adjusted the 2024-2025 net profit forecast to be 1.6 (original value 1.9) /2.1 billion yuan (original value 290) million yuan. The company's net profit to mother is estimated to be 260 million yuan in 2026. The current market value corresponds to PE of 43/33/26, respectively, maintaining the “increase” rating.
Risk warning: promotion of new products falls short of expectations, mergers and acquisitions integration falls short of expectations, fluctuations in raw material prices, etc.