The volume of acoustic systems drives revenue growth. Shangsheng Electronics achieved operating revenue of 2,326 billion yuan in 2023, an increase of 31.5% over the previous year, and net profit of 159 million yuan to mother, an increase of 82.40% over the previous year. 2024Q1 achieved revenue of 598 million yuan, a year-on-year increase of 32%, a year-on-month decrease of 18.5%, and realized net profit of 58 million yuan, an increase of 95.4% year-on-year and 12.9% month-on-month. The company's revenue growth was mainly due to orders from new products and new energy customers (NIO, Ideal, Huawei, BYD, etc.). NIO delivered 160,000 units in 2023, up 31% year on year. Ideal delivered 376,000 units in 2023, up 182% year on year. The company sold 79.07 million car speakers in 2023, up 18.3% year on year, and 424,200 power amplifier products, up 24.1% year on year.
Gross profit margins have been rising steadily in 2023. The company's gross sales margin in 2023 was 25.48%, +5.19pct year on year, and the net sales margin was 6.83%, +1.92pct year on year. 2024Q1's gross sales margin was 24.67%, +1.26pct year on year, -3.16pct month-on-month, net sales margin 9.75%, +3.12pct year-on-year, +2.61 pct month-on-month. The increase in the company's profitability is expected to benefit from the decline in raw material prices and the scale effect of product release: the price of the company's core raw material, rubidium iron, and boron, fell by about 33% at the end of 2023 compared to the beginning of the year; the company estimates that the global and domestic market share of the automotive speaker business in 2023 will be 13% and 23% respectively, maintaining a leading position.
High quality acoustics track, with the expansion of the company's acoustic systems, the overall competitiveness has improved. With the upgrading of the product category from speakers to the acoustic combination of speaker+amplifier+AVAS, the supporting value of the company's bicycles has increased from 100-200 yuan (4-6 speakers for bicycles), the mid-range configuration can be increased to 300-500 yuan, and the value of some models of bicycles has increased to about 1,000 yuan. The company has global delivery capabilities. The Suzhou production base already has production capacity for automotive speakers, car amplifiers, AVAS and related products. The company has established automotive speaker production bases in the Czech Republic, Brazil and Mexico. Currently, the company's power amplifier production capacity is around 1 million units. The Hefei plant completed infrastructure at the end of 2023, and the production capacity of the Hefei plant is expected to reach more than 2 million units after delivery. According to the company's 2024 “Improve Quality, Increase Efficiency, and Reward” action plan, the company will maintain a high R&D cost rate (no less than 6%) to consolidate its advantages in automotive speakers, and focus on breaking through projects in the field of acoustics such as sound algorithms, array speakers, active noise cancellation, multi-zone sound field, and electronic products.
Risk warning: Automobile industry sales fall short of expectations, customer development risk, raw material price increase risk, industry competition risk, policy risk, market risk, technical risk.
Investment advice: Considering the intensification of competition in the industry, the company's profit forecast was lowered, and the company's net profit for 2024-2026 was 2.38/3.21/401 million yuan (the original 2024/2025 forecast was 250/356 million yuan), an increase of 49.5%/35.0%/24.8% year-on-year, with earnings of 1.49/2.01/2.50 yuan per share, corresponding PE of 20/15/12 times, maintaining the “gain” rating.