Strong performance in 1Q24:1Q24 revenue +25.3% YoY/-5.4% YoY to RMB8.84 billion (22% of our full-year forecast), net profit to mother +51.8% YoY/-7.7% YoY to RMB1.39 billion (21% of our full-year forecast). Among them, 1) exchange losses affected 88.12 million yuan; 2) Taiyuan Jinnuo's termination of performance caused a loss of investment income of 210 million yuan; excluding the above effects, we estimate that 1Q24's total profit +61.8% year-on-year reached 1.99 billion yuan (net profit to mother reached 1.6 billion yuan), and the performance was strong.
Gross margin increased year on month, and overseas growth prospects are expected: 1Q24 automotive glass sales increased 20.0% year on year, ASP increased 7.5% year on year (high value-added products accounted for +4.4pcts year on year to 56.2% year on year), and automotive glass revenue +29.0% year over year to RMB 8.10 billion; of these, domestic/overseas auto glass revenue was +27.3%/+31.1% year on year, respectively. 1Q24 gross margin was +3.6pcts/month-on-month +0.3pcts to 36.8%, mainly benefiting from natural gas price reductions, internal efficiency improvements, and economies of scale. The 1Q24 marketing management research cost ratio was -0.1 pcts/month-on-month -0.3 pcts to 16.7%. We judge that 1) as US factories climb, overseas high-value-added products are expected to further increase the company's share of overseas business; 2) bulk raw materials+freight costs may maintain a downward trend, and the company's share of high-value-added products will increase in the context of intelligent electrification of automobiles, and the company's profitability will continue to be guaranteed.
The domestic and foreign front+rear markets are being promoted jointly, and the scale of the automotive glass business continues to expand: the company is simultaneously developing the front+rear car glass market, and has invested 5.75 billion yuan in the Anhui Hefei subsidiary to build automotive safety glass and accessory glass projects. We believe the company is expected to maintain its leading edge in volume/price/profit: 1) Volume:
Competitors' mass production pressure+the company's production capacity advantage is expected to drive Fuyao's global market share to rise steadily. 2) Price:
I am optimistic about the increased penetration rate of canopy/HUD, the continued increase in revenue share of high-value-added products such as ADAS front windshield/tempered laminator with cameras, the launch of new technology+ products driven by intelligent electrification, and the commissioning of new US projects to improve ASP at home and abroad. 3) Profit: We expect ASP growth+upstream cost down+lean company operation management, which is expected to drive steady improvement in profit margins. I am optimistic about the company's scale effect, intelligent electrification to help the business continue to improve, and long-term collaboration between automotive glass and aluminum trim.
Maintaining the “buy” rating of A shares and the “buy” rating of H shares: We expect Fuyao's leading effect in the industry to continue to show, and we are optimistic about the company's strong performance delivery ability; maintaining 2024E/2025E/2026E net profit to mother of approximately RMB 6.57 billion /7.58 billion yuan/8.50 billion yuan, respectively. The target price for A/H is RMB 63.01 /HK$55.45 (corresponding to approximately 25x/20x 2024E PE, respectively); the current dividend rate corresponding to 2024E A/H is about 3.3%/3.8%, respectively, maintaining the “buy” rating for A shares and the “buy” rating for H shares.
Risk warning: Downstream demand and capacity utilization fell short of expectations; smart electrification promotion/high value-added product application ratio fell short of expectations; cost control fell short of expectations; gross margin fell short of expectations; German SAM continued to drag down risk; rising global market share fell short of expectations; exchange rate risk; market risk.