Matters:
Recently, the company implemented the 2023 annual equity distribution, and distributed RMB 0.68 (tax included) in cash to all shareholders for every 10 shares, with a total cash dividend of about 100 million yuan (tax included). Based on the company's previous 23 annual report & 24 quarterly report, we made the following comments:
Commentary:
The company's revenue is relatively steady, and some businesses are under pressure in the short term. In 2023, the company achieved revenue of 4.11 billion yuan, an increase of 7.5% over the previous year. By category, PTC household PTC/new energy equipment/optical communication materials/lithium battery steel case business revenue was 12.7/3.0/19.6/5.0 billion yuan, -3.0%/+22.6%/+34.6%/-30.8%/-22.6%. Among them, household PTC market demand is sluggish, but the company has formed long-term stable customer relationships with leaders such as Gree and Midea, and revenue changes are relatively stable; thanks to strong production and sales in the domestic industry, the company has established cooperative relationships with many NEV companies to drive Revenue continues to rise; in terms of new energy equipment, the polysilicon product industry has a relatively high investment boom, and the company's orders are also relatively full; the optical communication materials market is competitive, and overall demand in the domestic market is falling, leading to pressure on the company's revenue; the lithium battery materials market is in broad demand. The company is the first domestic enterprise to achieve large-scale mass production of pre-nickel-plated battery steel strips, and there is plenty of room for future growth. The 24Q1 company's revenue was 800 million yuan, -3.4% year-on-year. Revenue performance was slightly under pressure. We judge that it may be related to the pace of revenue confirmation in some businesses and the progress of customer negotiations.
The performance is impressive, and the product structure continues to improve. In 2023, the company achieved net profit of 640 million yuan, an increase of 113.3% over the previous year, with impressive performance. On the one hand, thanks to the continued high growth in new energy-related businesses with higher profitability, on the other hand, the share of shovel-type household PTC increased. Product structure optimization also led to an improvement in gross margin, bringing the company's gross margin +3.4 pcts to 23.6% year over year. In terms of cost ratios, the company's sales/management/R&D/finance expense ratios were 0.9%/4.4%/5.0%/-0.5%, respectively, and -0.3/+0.2/-0.4pct, respectively. The sum confirmed that the subsidiary's revenue from the demolition and disposal of the Zhuhai Oriental plant was about 225 million yuan, which led to a significant increase in the company's non-financial profit and loss. Under the combined influence, the company's net interest rate in 23 was 15.7%, +7.8pcts year on year, and profitability continued to increase. The 24Q1 company achieved net profit of 90 million yuan, +27.1% year over year, and gross and net margin +4.4/2.3 pcts year over year to 23.7%/9.8%, respectively. It is expected that future profitability will continue to recover.
Some businesses have technical barriers, and there is plenty of room for subsequent growth. The company started with a home appliance circuit, and resources such as Glimax, the leading customer were of high quality and stability. Subsequently, along with the increase in the share of shovel-type PTC, the profitability of the home appliance business improved. However, in recent years, the new energy business has continued to grow. On the one hand, the company has a first-mover advantage in electric vehicle PTC technology, which is expected to benefit significantly in the context of the boom in electric vehicles; on the other hand, independent research and development fills gaps in domestic technology, and the release of production capacity for new energy equipment manufacturing further drives customer orders. Furthermore, as one of the few domestic manufacturers with a complete process for pre-nickel-plated steel shells, the cost performance advantage is expected to drive domestic replacement of pre-plated nickel, and there is still plenty of room to release production capacity under production expansion plans. We believe that the company has formed a core technological pioneer advantage in some fields of new energy, and is expected to usher in rapid growth with the support of the high prosperity of the industry.
Investment advice: The company's operations are under pressure in the short term. We adjusted the 24/25 EPS forecast to 0.29/0.34 yuan (previous value 0.46/0.60 yuan), and added the 26-year EPS forecast to 0.40 yuan. The corresponding PE is 14/12/10 times. Referring to the DCF valuation method, we adjusted the target price to 4.8 yuan, corresponding to 17 times PE in 24 years, and adjusted to a “recommended” rating.
Risk warning: Industrial policy changes, technology iterations falling short of expectations, and customer demand falling short of expectations.