Incident: The company released its 2023 annual report. In 2023, it achieved revenue of 350 million yuan, +30.2% year on year, and realized net profit of 80.2% year over year, and realized net profit of 67.07 million yuan, +28.1% year over year; of these, single Q4 achieved revenue of 98.56 million yuan, +40.7% year over year, and achieved net profit of 21.83 million yuan, +82.4% year over year. The performance was in line with market expectations.
Focusing on automotive die castings, magnesium alloy's share of revenue continues to rise. The company achieved revenue of 350 million yuan in 2023, +30.2% year-on-year, of which the automotive die-casting business accounted for 87.3%, achieving revenue of 310 million yuan, or +45.2% year-on-year.
In terms of product structure, magnesium alloy die castings achieved revenue of 2.1 billion yuan, +39.9% year-on-year, accounting for 60.2% year-on-year increase: aluminum alloy die-castings achieved revenue of 110 million yuan, +38.3% year-on-year, accounting for 31.9%, up 1.9 percentage points year-on-year: the mold business achieved revenue of 22.33 million yuan, a year-on-year decrease of 32.6%, accounting for 6.34% of revenue. In terms of sales volume, automotive products achieved sales volume of 6.683 million units in 2023, +9.0% year-on-year; non-automotive products achieved sales volume of 329,000 units, a year-on-year decrease of 41.3%; mold products achieved sales volume of 31 pairs, a year-on-year decrease of 51.6%. The company's overall revenue structure is dominated by magnesium, and it continues to focus on the magnesium alloy automobile die-casting business.
The gross margin declined slightly, the net interest rate remained high, and the three expenses remained stable as a share of revenue. The company's comprehensive gross margin in 2023 was 35.7%, down 1.6 percentage points year on year, and net interest rate was 227%, up 2 percentage points year on year. The year-on-year decline in gross margin was mainly dragged down by changes in the 2023q4 revenue structure, and there were many shipments of low gross margin products. In terms of expenses, the company generated sales expenses of 9.892 million yuan in 2023, accounting for 2.8% of revenue, which was basically the same. Management expenses were 22.838 million, accounting for 6.5% of revenue, an increase of 0.4 percentage points over the previous year, generating R&D expenses of 1.81 million yuan, accounting for 5.6% of revenue, which was basically the same as the previous year. The revenue share of the company's three expenses remained stable, and the profit level remained high.
Automotive magnesium die-casting is progressing steadily, and we are looking forward to the future. The company promoted a number of production capacity layouts during the reporting period. The company signed a “Project Investment and Construction Agreement” with the Ningbo Fenghua Economic Development Zone Management Committee, and plans to invest in the construction of a large-scale high-strength magnesium alloy precision molded parts project for automobiles with an annual output of 3 million sets in the Fenghua Economic Development Zone in the future. At the same time, during the reporting period, the company made strategic initiatives to invest in the construction of a production base in Thailand to better explore the international market, meet the needs of overseas customers, and improve the global layout. The company promotes semi-solid die-casting technology, expands the R&D and application of semi-solid low-temperature injection molding technology, and strives to lead the industry's technological outlet in future magnesium die casting competition and occupy a leading position in the industry.
Profit forecasting and investment advice. It is estimated that 2024-2026 will achieve revenue of 520 million yuan, 760 million yuan, and 1.07 billion yuan, and realized net profit of 120 million yuan, 160 million yuan, and 210 million yuan, respectively. The corresponding EPS is 1.46 yuan, 1.98 yuan, and 2.69 yuan, respectively, and the corresponding PE is 36 times, 27 times, and 20 times, respectively. Maintaining a “buy” rating, considering that the company's performance is expected to experience rapid growth in the future.
Risk warning: risk of a sharp rise in raw materials, risk of downstream demand falling short of expectations, risk of falling short of expectations in macroeconomic downturn, risk of falling short of expectations in fund-raising projects, risk of releasing large magnesium alloy products or falling short of expectations.