Net profit for the first quarter increased 29% year over year. 2024Q1 Double Ring Drive achieved revenue of 2.08 billion yuan, +15.8% YoY, -5.8% month-on-month, 24Q1's net profit of 220 million yuan, +29.4% YoY, -2.5% month-on-month, after deducting non-net profit of 210 million yuan, +34.9% YoY. The profit growth rate was higher than the revenue growth rate, mainly due to the release of scale effects and the promotion of the company's cost reduction and efficiency strategy. The company's heavy truck automatic transmission gear business and new energy vehicle gear business all showed a good growth trend (NEV transmission gear product revenue of 2.23 billion yuan in '23, accounting for 27.6%); at the same time, the company continued to promote internal cost reduction and efficiency, independent innovation, etc. to effectively improve manufacturing capacity, reduce unit costs, and drive steady growth in the company's performance.
Driven by cost reduction and efficiency, the cost control effect was good, and the net interest rate increased year-on-month. 24Q1 Shuanghuan gross profit margin 22.7%, year-on-month +1.8pct, month-on-month; 23Q1 Shuanghuan sales/management/R&D/finance rates were 0.9%/3.7%/4.8%/0.5%, respectively, +0/-0.5/+0.7/+0.5pct year-on-month, respectively, -0.3/-1.2/-0.7+0.5pct month-on-month, net profit margin 10.7%, year-on-year +1.1pct, year-on-month increase in profitability is mainly expected 1) The increase in production capacity utilization is expected to be driven by product volume Scale benefits continue to be unleashed; 2) Cost reduction and efficiency continued to advance (flexible manufacturing, digital promotion, etc., with a 20% increase in per capita efficiency); 3) The product structure continued to improve, and the NEV drive gear production capacity reached 5 million sets, while the high-profitability commercial vehicle business continued to grow (+71.3% YoY in commercial vehicle gear revenue in '23). As of March 31, Shuanghuan had repurchased a total of 7339,400 shares of the company's shares, accounting for 0.86% of the company's total share capital, demonstrating the company's operating confidence.
Looking forward to the future, the promotion of a global strategy and expansion of the category matrix are expected to open up room for growth. Shuanghuan has seized two rounds of upgrade opportunities. Round 1: the gear outsourcing trend brings order opportunities from third party suppliers; round 2:
The explosion of new energy vehicles raised entry barriers+ spawned demand for gears. Shuanghuan relied on advantages such as forward-looking production capacity layout+batch supply capacity to lock in factory orders and achieve deep binding. We believe that today Shuanghuan coincides with the third round of upgrade opportunities, namely ① going overseas: advancing global strategies, building overseas factories (Hungary invests 120 million euros) and breaking through with customers, and is expected to open up long-term space in the future; ② platformization: We believe that Shuanghuan's core strengths lie in the three dimensions of product (consistency+performance), management (cost reduction and efficiency), and R&D (technology and development capacity) to build a platform-based supply system supported by products such as car-side gears+robot reducers. Relying on this advantage, it is expected that the product line will continue to open up a new growth curve.
Risk warning: Risk of automobile sales falling short of expectations, increasing competition in the industry, and falling short of expectations in product development.
Investment advice: Domestic high-precision gear experts maintain a “buy” rating. Optimistic about Shuanghuan's overseas expansion to open up long-term growth space and product line development, and maintain the 24-25 profit forecast. It is estimated that in 24/25/26, Shuanghuan Transmission's net profit of 10.45/13.53/1,621 billion yuan, corresponding EPS is 1.22/1.59/1.90 yuan, and corresponding PE is 19/15/13x, maintaining a “buy” rating.