Key points of investment:
Incident: The company released its 2024 quarterly report, which fell short of market expectations. In the first quarter of 2024, the company's revenue was 860 million yuan, up 21.9% year on year; net profit without return to mother was 50 million yuan, down 29.1% year on year; net profit to mother was 70.97 million yuan, down 10.3% year on year.
New orders are expected to grow faster than the industry, and the market share continues to increase. According to the company's first quarter results forecast announcement, the company signed new orders of 1,203 billion yuan in the first quarter of 2024, an increase of 26.9% over the previous year. It is expected that the growth rate of Abison's orders will continue to be higher than the industry average, reflecting an increase in market share. According to the company's announcement, the company's strategic planning goal is to achieve 8 billion signatures in 2024 (an increase of about 51% year over year) and 10 billion signatures in 2025.
The first quarter was a low season for the LED industry, which had a low impact on full-year results. The seasonal effects of Abbison's revenue and orders were obvious, showing a quarterly growth pattern from the 1st to 4th quarter. Abbison 1Q23 revenue accounted for 17.5% of the full year of 2023 revenue, and 1Q22 accounted for 17.6% of 2022's revenue. The company's 1Q24 cost side increased investment in exhibition promotion and marketing network layout. In the future, it is expected to accelerate revenue and order growth, and achieve the annual target of 8 billion orders.
The net profit margin base was high in 1Q23, and net profit declined due to increased expenses in 1Q24. In the first quarter of 2024, the company strengthened its domestic and foreign marketing network, operational capacity, etc., and participated in and held many international exhibitions and press conferences, which led to a year-on-year increase in sales expenses and management expenses. 1Q24's sales expenses ratio was 15.7%, an increase of 1.7 pcts year-on-year, and a management fee ratio of 5.9%, and an increase of 0.5 pcts year-on-year. In terms of base, the company's net profit margin for the first quarter of last year was 11.12%, the highest in nearly 4 years. Although the net profit margin for the first quarter of 2024 was 7.84%. Although it was a significant decline compared to 1Q23, it was higher than 7.72% for the full year of 2023. The net profit margin for 2Q23 was 7.12%. With a relatively low base, the company's net profit growth rate in 2Q24 is expected to perform well.
The gross margin is still above 30%, and the bargaining power of the industrial chain is strong. The company's gross profit margin for the first quarter of 2024 was 30.4%, up 0.8 pcts from the full year of 2023. While the company's 1Q24 market share increased, gross margin did not decline significantly. To some extent, it reflects that the company's voice in upstream is weak, and the company's profitability is expected to maintain the level of the first quarter throughout the year.
Investment analysis: Maintain 24-25 profit forecasts and maintain a “buy” rating. The company's increased expenditure brought short-term pressure on net profit but helped accelerate subsequent revenue and profit growth. It is expected that the market share will increase smoothly, maintain the company's 2024-2025 profit forecast and add the 2026 profit forecast. The company's revenue for 2024-2026 is expected to be 60.2, 80.0, and 9.85 billion, respectively, with year-on-year growth rates of 50.3%, 32.8%, and 23.1% respectively; the company's net profit from 2024 to 2026 is 4.69, 635, and 848 million, respectively. 35.5% and 33.5%, corresponding dynamic price-earnings ratios are 11, 8, and 6 times, respectively.
Risk warning: Increased competition has led to a decline in gross profit margin and net interest rate; the company's overseas business is mainly settled in US dollars, and exchange rate fluctuations may have an impact on revenue.