Inovance's net profit attributable to shareholders of the parent company increased by 5.17% year-on-year in the first half of the year

On August 22, Huichuan Technology (300124) held a performance briefing to interpret the 2023 semi-annual report. The report showed that the company achieved revenue of 12.451 billion yuan in the first half of the year, a year-on-year increase of 19.76%, and net profit attributable to shareholders of 2.077 billion yuan, a year-on-year increase of 5.17%.

The company stated that the main reasons for the revenue growth were, first, it seized the structural opportunities in the automotive, photovoltaic energy storage, chemical and other industries through "top-down"; second, it had the advantage of multiple solutions based on process understanding; and third, against the background of increased localization rate, the company's leading enterprise effect was highlighted.

It is reported that Huichuan Technology is the leader, and its main businesses are general automation, elevators, new energy vehicles, and rail transit.

"General automation business is the business sector with the largest revenue support for the company, and it is also a sector with relatively good profitability, which is a good track for long-term steady growth." In an interview with the Securities Daily reporter, a person from Huichuan Technology Certificate Agent said. In the first half of the year, the company's general automation revenue reached 6.855 billion yuan, accounting for 55.06% of the total revenue, and the gross profit margin reached 46.45%.

Multiple product layouts advance into the race

It is reported that the general automation business of Inovance covers core products such as servo systems, (/CNC), and robots. Among them, servo systems and inverter products currently rank first in the domestic market share, and small PLC products rank second in the Chinese market.

The company said it adheres to a multi-product strategy based on general automation. Starting from the early inverter products, to servo products, to "PLC+servo", and then incorporating new products such as industrial robots, /DDL, and pneumatics, the company's comprehensive solutions have been steadily enhanced.

Among many products, robots, as the "crown jewel of manufacturing", are a highly anticipated track. Their research and development, manufacturing, and application are important indicators of a country's scientific and technological innovation and high-end manufacturing level.

The semi-annual report shows that the company mainly provides SCARA robots, six-joint robots, vision systems, high-precision lead screws, control systems, linear guides and other complete machine and component solutions to downstream industry customers in the robotics industry chain.

"The company's current industrial robot revenue, which has been incorporated into General Automation, is approximately 346 million yuan. Among them, SCARA robots rank second in the domestic market share," the person said.

The company revealed at the performance briefing that in addition to the robots based on production line automation scenarios (including SCARA and small six-joint robots) with good growth, heavy-duty robot products above 50kg will also be completed in the future. For humanoid robots, it is still in the insight and planning stage. The company has mastered the relevant technical points, and there are no products with direct application. The company will continue to follow up on the technology in the future. The 220kg heavy-duty six-joint robot has been launched, and robots with other loads are moving forward according to product planning.

Huachuang Securities Research Report stated that the humanoid robot industry is in the ascendant, industrial machine tools are moving towards the mid-to-high end, and new energy vehicles are rising in both quantity and price, providing a broad market growth. Driven by the industrialization and cost reduction of humanoid robots represented by Bot, China is expected to quickly enter the manufacturing link with cost advantages after long-term technology accumulation, and core components are ushering in the best development opportunities.

Net profit growth slowed down and gross profit declined

Under the trend, the internal and external development of the main business have made Huichuan Technology's performance soar, but some "sub-healthy" financial indicators are still worthy of attention.

The semi-annual report shows that the company's net profit attributable to shareholders of the parent company grew slower than its revenue growth rate, which was 14.59 percentage points lower, and the growth rate also fell by 21.19 percentage points compared with the same period last year.

In this regard, the company stated that the main reason for the slowdown in the growth rate of net profit attributable to shareholders was the company's increased investment in strategic businesses such as digitalization, energy management, and international business, the increase in employee salary expenses and equity incentive expenses, and the year-on-year decrease in income from equity investment projects.

While the company is actively promoting a multi-product strategy, its gross profit margin has declined. The financial report shows that in the first half of 2023, the company's gross profit margin was 36.27%, a year-on-year decrease of 0.1 percentage points; the net profit margin was 16.79%, a year-on-year decrease of 2.4 percentage points. In terms of business, the decline in gross profit margin of new energy vehicle business is the main reason.

In this regard, the company stated that competition in the new energy vehicle market is very fierce, product gross profit margins are generally low, corporate profitability is low, and due to changes in the company's new energy vehicle sales revenue structure, the proportion of revenue from low-gross-profit large customers has increased, so the comprehensive gross profit margin of new energy vehicles has decreased year-on-year.

In addition, the company's accounts receivable reached 7.57 billion yuan and notes receivable reached 1.458 billion yuan, accounting for a total of 22.34% of total assets.

"The company's accounts receivable and notes receivable are related to 'credit'." The person told the reporter that this credit model is basically used by domestic manufacturing and foreign capital. For partners with better qualifications, in order to cultivate or support them in expanding customer business, sometimes it is necessary to give them a period of 'credit', that is, to allow payment after the credit period ends. "Our second quarter revenue is higher, which means that the degree of recovery of accounts receivable is higher than that of the first quarter. In general, the company's management of accounts receivable and notes is very strict."

In addition to accounts receivable, the company's accounts payable were also high, totaling 9.846 billion yuan, accounting for 14.36% of total assets, while monetary funds were only 6.086 billion yuan.

Luo Pan, executive dean of Practical Finance Business School, said in an interview with the Securities Daily: "If a company's accounts receivable are not good and its cash flow is not particularly good, it must be alert to the greater liquidity risk, that is, the risk of cash flow interruption, in order to repay nearly 10 billion yuan of debt. Of course, it also needs to be judged comprehensively based on the company's business characteristics."

"The main reason for the company's accounts payable is that the purchase of raw materials has not yet been paid, and the notes payable are also the payment for the raw materials paid with bank acceptance bills. The company's current assets have a strong ability to convert into cash, and it has sufficient cash to repay matured debts." The person who handles the company's certificate told reporters on this issue.

Review editor: Liu Qing