Lower profit forecasts and maintain “buy” ratings
New Lightning released its annual report, achieving revenue of 1,467 billion yuan (yoy -14.40%) and net profit of 96.8306 million yuan (yoy -65.75%) in 2023. Considering fluctuations in downstream demand in the specialty and communications sector, we lowered our profit forecast. The company's net profit for 2024-2026 is estimated to be $1.73/2.40/304 million yuan, respectively (the value was 368/485 million yuan in 24-25 years ago). Comparatively, the company Wind agreed to expect an average PE value of 23 times. The company is a scarce domestic supplier of all types of power supplies. Power micromodules are expected to create a new growth point, giving 29 times PE in 24, with a target price of 9.28 yuan (19.80 yuan after excluding the previous value), maintaining a “buy” rating.
Downstream demand in the specialty and communications fields all fluctuated. Looking at the company's gross margin under short-term pressure, 2023:1) Power supplies and motor drives achieved revenue of 1.358 billion yuan, -15.11% year-on-year, and gross margin decreased by 3.96pcts to 44.22% year on year; 2) Integrated circuits and integrated circuit micromodules achieved revenue of 171 million yuan, +34.95% year over year; by sector, 2023:1) The high-specialty reliability sector achieved revenue of 968 million yuan, -7.94% year over year, gross margin decreased 4.91 pcts year on year to 4.91 pcts year on year 57.10%; 4) Communications and data centers achieved revenue of 482 million yuan, -26.03% year over year, and gross margin decreased 2.97 pcts year over year to 21.82%. We believe that fluctuations in demand in the special sector are mainly due to delays in the issuance of mid-term orders in the industry. If orders are fulfilled, industry demand is expected to reverse the difficult situation. The slowdown in demand in the communications sector is mainly constrained by the pace of downstream base station construction, and subsequent demand is expected to return to steady growth.
The company continues to increase investment in R&D, and has made breakthroughs in all fields
In 2023, the company continued to increase the proportion of R&D investment. R&D expenses were +27.98% to 332 million yuan, and the R&D expenses ratio was +7.51pcts to 22.66% year-on-year. In high-reliability fields such as aviation and aerospace, the company has strengthened requirements and traction in miniaturization and lightweight design, and has achieved breakthroughs in model projects in the field of airborne secondary power supplies. In the field of communications, the company focused on research and development of multi-mode multi-frequency base station power supplies, micro stations and repeater power supplies. In the field of data center server power supplies, the company completed the task of localizing mainstream server power supplies up to 1,300W, and achieved batch shipment of server power supplies up to 1600W. Furthermore, according to the company's annual report, due to industry fluctuations, the holding subsidiary Yongli Technology did not meet the company's expectations and calculated goodwill depreciation of 49.501 million yuan, making the company's net profit decline in 23 higher than revenue.
The impact of fluctuations in market demand in 24Q1 has not been eliminated. The company's performance declined year on year. The company released its 2024 quarterly report: 2024Q1 achieved revenue of 200 million yuan, or -59.84% year-on-year, and realized net profit of -39 million yuan, or -133.89% year-on-year. According to the company's announcement, the year-on-year decline in first-quarter results was mainly affected by the macroeconomic environment and industry cycle, and market demand fell short of expectations. By the end of 24Q1, the company: 1) accounts receivable and notes were $1,082 million, down 6.02% from the beginning of the year; 2) prepayments of $15 million, up 49.64% from the beginning of the year; 3) inventory of $1,030 million, up 1.86% from the beginning of the year; 4) contract liabilities were $0.27 billion, up 82.15% from the beginning of the year.
Risk warning: The company's military business orders fall short of expectations, and the risk of fluctuations in product gross margin.