Changying Precision released its 2023 Annual Report and First Quarter 2024 Earnings Forecast:

In 2023, the company achieved revenue of 13.722 billion yuan, a year-on-year decrease of 9.74%; realized net profit of 86 million yuan, an increase of 102.23% over the previous year. 2024Q1 expects to achieve net profit of 2.5-350 million yuan, turning a loss into a profit; it is expected to achieve net profit of 105-135 million yuan after deduction, turning a loss into a profit.

Key points of investment

Benefiting from the positive recovery of the consumer electronics and new energy markets, profitability continues to improve

Weak demand for terminals in the consumer electronics industry in the first half of 2023 affected the company's overall revenue decline slightly, down 9.74% year on year. However, with the recovery of the consumer electronics and new energy markets, major international and domestic customers all mass-produced and delivered important new projects. 2024Q1 revenue increased by about 30% year-on-year, reaching a record high in the first quarter. In terms of profitability, benefiting from the increased capacity utilization rate of the new energy components business and the positive impact of exchange rate changes, the company achieved a year-on-year increase of 102.23% to 86 million yuan in 2023, and gross margin increased 2.49pct to 19.86% year-on-year.

Technological innovation continues to be strengthened, and the consumer electronics business is revitalized. In 2023, the company continued to strengthen technological innovation in new materials and processes, and many new projects in the consumer electronics business made significant progress. In terms of new materials, we successfully mass-produced titanium alloy structural parts for Android customers' smartphones and supplied titanium alloy frames for Samsung Galaxy S24; the XR (AR/VR/MR) project also successfully achieved mass production, providing key exterior parts for VisionPro. As of March 31, Vision Pro also sold more than 370,000 units in the US market. Thanks to a significant increase in shipments of Samsung Galaxy S24 and Apple Vision Pro, the company's performance increased dramatically in the first quarter of 2024. In addition to mobile phones and XR devices, the company is also an important supplier of high-end PC products, and has provided components for new smart terminal products to leading AI companies. Generative artificial intelligence will drive the consumer electronics industry into a new round of product innovation and switching cycles. The company will fully benefit from the accelerated penetration of AI hardware and inject new vitality into the consumer electronics business.

Production capacity in the new energy business was gradually released, accelerating the layout of overseas business. In 2023, the company's new energy business maintained rapid growth, achieving revenue of 3,540 billion yuan, an increase of 43.46% over the previous year. The revenue share increased 9.57 pcts to 25.80%, mainly due to the release of production capacity at power battery structural parts production bases in Yibin, Zigong, Changzhou and Ningde. At present, the company has become the core supplier of Quanjie Auto, mainly supplying battery box assemblies and Busbar products. At the same time, the company has stepped up efforts to build overseas production bases. Production sites in Vietnam and Mexico already have initial shipping capacity. In the future, it will promote the implementation of production bases in Europe to enhance global delivery capabilities.

Profit forecasting

The company's revenue for 2024-2026 is 169.94, 205.30, and 24.067 billion yuan, respectively, and EPS is 0.58, 0.74, and 0.91 yuan, respectively. The PE corresponding to the current stock price is 18, 14, and 12 times, respectively. Currently, the consumer electronics and new energy market is recovering. Generative AI will increase the value and ecological innovation of downstream smart hardware, and accelerate the pace of upgrading and recovery of mobile phones, PCs and XR devices. The company's overall performance is expected to grow. We are optimistic about the company's development prospects and will raise the rating to “buy.”

Risk warning

Macroeconomic risk, risk of exchange rate fluctuations, risk of customer concentration, risk of downstream demand recovery falling short of expectations, etc.