Incident: The company released its 2023 annual report, achieving revenue of 3,913 billion yuan, +16.62% year-on-year, and net profit of 497 million yuan, or +11.05% year-on-year. Looking at the spin-off, Q4 achieved revenue of 1,166 billion yuan, +21.01% year-on-month, +15.25% month-on-month, and realized net profit of 110 million yuan to mother, -16.60% year-on-year and -21.20% month-on-month.
Benefiting from the increase in sales volume from downstream customers, the company's performance increased steadily. Revenue side: The company achieved revenue of 3,913 billion yuan in '23, +16.62% year-on-year. It is expected to be mainly supported by Tesla, the two major downstream customers, and ideal sales growth.
According to data from the Passenger Federation, the retail sales volume of Tesla China/Ideal Auto in '23 was 60.37/376,000 units, up 37.27%/182.21% year on year. The two major customers continued to gain strength, and NEV customers accounted for more than 70% of the company's annual revenue. In terms of profitability, the company's gross margin/net margin in '23 was 23.21%/12.67%, respectively, -1.32pp/-0.63pp. The cost ratio for the period was 5.93%, and -0.9pp year-on-year. Expense control showed certain results. We expect that the decline in gross margin in '23 was mainly due to factors such as depreciation of fixed assets. In the context of increased competition in the industry this year, the company may continue to strengthen cost control.
Actively increase production capacity and add fixed points to ensure the sustainability of profits. In '23, the company added new locations for supporting customers and set up wholly-owned subsidiaries Jinhua Daya and Changzhou Duoli. Production line technical improvement projects at the main production bases were completed and put into operation. The company's production capacity was increased, the degree of production automation was increased, and cost control capabilities were further enhanced.
In September '23, the company was selected by leading domestic NEV customers, supporting integrated die-cast floor parts. The project is expected to begin mass production in 2025, with an estimated total sales amount of about 21-23 billion yuan during the life cycle. The company's annual report revealed that the company's business development was smooth in '23. The new customers and locations will provide a strong guarantee for the company's continued profit and steady operation.
Continue to improve the business sector and increase the lightweight layout. The company continues to improve its business layout. In September 2023, it was announced that it plans to invest in the construction of a new “automotive precision parts and integrated chassis structural parts project” in the Jiangsu Jintan Economic Development Zone. The project will be implemented in two phases. It plans to build an industry-leading automated production line for automotive precision parts and integrated chassis structures to achieve the goals of low carbon, environmental protection and sustainable development. The project fully achieves the estimated annual sales of 1.7 billion yuan after delivery. In December '23, the world's first Bühler 9200T die-casting unit was opened at Duoli's Yancheng plant. At the opening ceremony, the company's general manager explained that the Changzhou and Anhui plants will also plan a number of oversized die-casting production lines to help further improve the company's business layout.
Profit forecasting and investment advice. The company's 2024-2026 EPS is expected to be 3.18/3.78/4.49 yuan, corresponding PE is 12/10/8 times, and the compound annual growth rate of net profit returned to mother will reach 18.41% over the next three years, maintaining a “buy” rating.
Risk warning: the risk of new customers and new product development falling short of expectations; risk of exchange rate fluctuations; risk of raw material price fluctuations; risk of capacity expansion falling short of expectations.