2023 and 1Q24 results are in line with our expectations
In 2023, the company achieved revenue of 6.754 billion yuan, an increase of 23.3%, net profit of 629 million yuan, an increase of 33.13%, after deducting non-net profit of 355 million yuan, an increase of 39.02%; of these, 4Q23 revenue was 1,888 billion yuan, a net profit of 147 million yuan, a decrease of 12.87%, after deducting non-net profit of 48.3 million yuan, an increase of 135.8%. 1Q24 achieved revenue of 1.83 billion yuan, an increase of 17.32%, net profit of 139 million yuan, a decrease of 13.96%, after deducting non-net profit of 122 million yuan, an increase of 25.62%, in line with our expectations.
Development trends
The company blossomed a lot in 2023, and many businesses achieved high revenue growth. In 2023, the company's smart home appliance electronic control/power supply/new energy and rail transit/industrial automation/intelligent equipment/precision connectivity increased by 25.3%/12.6%/34.9%/53.7%/23.2%/15.8% to 26.2/21.2/7.1/5.8/3.7/320 million yuan, accounting for about 38.8%/31.4%/10.5%/8.7%/5.4%/4.7%. We continue to be optimistic about the company's platform-based layout.
The share of overseas revenue continues to rise, and we are optimistic about the company's revenue elasticity and profit elasticity as overseas business continues to develop. The company continues to replace overseas products with advantages such as product performance, cost performance, and service. Among them, electronic controls for smart home appliances, OA power supplies, welding machines, and server power supplies are all representative overseas products of the company. Judging from the production capacity layout, the company continues to strengthen overseas delivery capabilities, build part of its production capacity in Thailand, and basically achieve localized delivery in India. In 2023, the company achieved direct overseas revenue of 1.95 billion yuan, accounting for about 29%, and indirect overseas revenue accounting for about 11%, for a total of about 40%. The gross margin of the company's overseas business in 2023 was about 29.5%, up 3.04ppt from the previous year, and 6.38ppt higher than the gross margin of the domestic business. We continue to be optimistic about the flexibility in performance brought about by the increase in the share of the company's overseas business.
The company's profitability improved, and non-recurring revenue was compressed in 1Q24. In 2023, the company's deducted non-net interest rate increased by 0.6ppt to 5.3% year-on-year, and the 1Q24 deducted non-net interest rate further increased to 6.6%. In 2023, the company's net profit increased 39% after deducting equity incentives and debt conversion expenses, and net profit increased 46%. Due to factors such as improved gross margin, 1Q24's non-net profit still increased 25.6% year-on-year, and the deducted non-net interest rate was raised to 6.6%. However, due to the high fair value base of equity based on investment in the same period last year, the company's non-recurring income also fell 74%, leading to a 14.0% decrease in net profit to mother.
Profit forecasting and valuation
Considering the sharp decline in the company's non-recurring revenue in 1Q24 and the increase in cost investment in server power products in 2023, we lowered 2024 revenue by 9.2% to 8.33 billion yuan, introduced a 2025 revenue forecast of 10.33 billion yuan, and also lowered the 2024 net profit forecast by 24.9% to 690 million yuan, and introduced a net profit forecast of 860 million yuan for 2025. The current stock price corresponds to 15.9x/12.8x P/E for 2024/25. The company is still a high-quality power electronics company. We have lowered our target price by 20% to 28 yuan, corresponding to 20.4x/16.4x P/E in 2024/25, and there is still room for 28% increase compared to the current stock price.
risks
Downstream demand falls short of expectations, industry competition intensifies, and new business development falls short of expectations