Introduction to this report:
1Q24 The company's net profit improved significantly from month to month, exceeding market expectations. The company continued to optimize its governance structure to reduce costs and increase efficiency, and increase profitability in a single quarter.
Key points of investment:
Maintain the target price at $82.10 and maintain the “Overweight” rating. Referring to the company's performance and comparable company valuations, maintain the 24-26 EPS of 2.16/2.78/ 3.32 yuan, give 38 times PE for 24 years, maintain the target price of 82.10 yuan, and maintain the “increase” rating.
Growth slowed in 24Q1 due to downstream demand, and profitability improved significantly. 1) Revenue slowdown: In 24Q1, the company's revenue was 1,614 billion yuan (-9.5%), 4Q23 to 1Q24. The company's revenue declined year-on-year for two consecutive quarters, mainly due to a slowdown in the downstream demand-side pace. 2) Significant month-on-month increase in profit: In the four quarters of '23, net profit to mother increased by +38.1%, +40.9%, +24.0%, and +36.7%, respectively. Net profit from 1Q24 increased 2.7% year-on-year, and the growth rate slowed down, achieving a sharp increase of 45.4% month-on-month. 3) Profitability improvement: The company continues to optimize its governance structure to reduce costs and increase efficiency. 1Q24 gross margin increased 4.4 pcts to 40.3% year on year; net interest rate increased 1.8 pcts to 15.8% year on year.
Equity incentives stimulate employee enthusiasm, and core aerospace connector suppliers continue to upgrade. 1) New products such as aerospace connectors, high-speed series connectors, and microwave components have achieved market breakthroughs and achieved batch orders, and have been applied in commercial aerospace, artificial intelligence, and new energy fields. 2) The company completed the registration of the first restricted stock incentive plan in May 2023. The implementation of equity incentives helped stimulate employees' enthusiasm and demonstrated the company's confidence in subsequent continuous development. 3) The company is the core supplier of aerospace connectors in China. The categories continue to expand, and the transformation and upgrading from a single component to an integrated interconnection and overall drive control solution.
Catalyst: The company invests in the construction of civil connectors and civil motors industries in Zengcheng, Guangzhou.
Risk warning: The growth rate of military orders falls short of expectations, and downstream demand such as communications falls short of expectations.