23 years of results are in line with our expectations
The company announced its 2023 results: revenue of 2,317 billion yuan, +32.7% year-on-year, net profit to mother of 277 million yuan, +242.6% year-on-year. 4Q23 revenue was 701 million yuan, +39.82%/+8.34% YoY, net profit to mother was 111 million yuan, +205.7%/+45.3% YoY. The results are in line with previous forecasts and in line with our expectations.
Development trends
The volume of core customers drives growth, and we are optimistic that the launch of new customers and new projects will support high growth in 24 years. In 2023, the stamping parts business/sub-assembly processing/selective precision electroplating processing/mold business achieved revenue of 12.72/5.91/1.53/128 million yuan, YoY +7.6%/+14.2%/+39.9%. SAIC Passenger Cars is the company's core customer. We estimate that SAIC passenger cars will contribute about 40% of revenue in 2023; SAIC exported 97,000 passenger cars in '23, +25.6% over the same period, driving a high increase in the company's sub-assembly processing business. The company actively embraced new energy customers such as Tesla, Ideal, Xiaomi, and Zhiji, accounting for 30% of the new energy business at the end of 2023. Looking ahead to 2024, we expect the launch of new projects and mass production to support high revenue growth. The share of the new energy business is expected to increase to 50% in 2024.
Profitability has improved quarter by quarter, and the inflection point in performance has been reached. The gross margin/net margin for 2023 was 25.1%/12.0%, YOY+9.7/+7.3ppt. The corresponding 4Q23 gross margin was 26.1%, YOY/QoQ+6.7/-0.4ppt; the net profit margin to mother was 15.8%, YOY/QoQ+8.6/+4.0ppt, which improved quarterly for six consecutive quarters and reached a record high. We believe that the main reason is the release of the scale effect, the decline in steel prices, and the increase in revenue share of the split assembly business relative to gross margin. On the cost side, the cost rate for the 2023 period was 5.6%, -2.7ppt year on year, mainly the R&D/management cost ratio was -1.5/-0.9ppt year on year. In addition, the return of 4Q23 asset impairment losses and value-added tax credit brought in a one-time income of nearly 30 million yuan, increasing quarterly profits.
The production capacity layout is perfect, and convertible bonds help continue to expand production. In December 2023, a convertible bond plan was announced. It is proposed to raise no more than 900 million yuan to build the Zhengzhou Junrun Expansion Project and the Shanghai Lingang Plant Phase II project to target potential customers including leading car companies such as SAIC Motor and Tesla. Currently, the company has 9 production bases including Wuxi+Shanghai+Zhengzhou+Ningde+Wuhan+Langfang, and is full of orders from SAIC, Xiaomi, Ideal and other customers. We are optimistic that the company's new production capacity will be officially put into operation in the future to release flexible performance.
Profit forecasting and valuation
We maintain our 2024/2025 earnings forecast. The current stock price corresponds to 12.9/11.0 times P/E in 2024/2025. We maintain our outperforming industry rating and maintain our target price of 29.7 yuan, which corresponds to 19.7/16.7 times P/E in 2024/2025, which has 53.9% upside compared to the current stock price.
risks
Export growth is slowing down and competition is intensifying; customer concentration is high; raw material prices fluctuate; business development risks.