Impro Precision: Interim results continue to improve, stock price rises amid adversity, and US peer also climbs to new high

HONG KONG, Aug 16, 2023 – (ACN Newswire) – Impro Precision (01286.HK), the world’s sixth largest independent and China’s largest investment casting manufacturer, announced its 2023 interim results last week. Sales increased by 9.7% year-on-year to HK$2.4 billion, while net profit rose by 13.3% year-on-year to HK$300 million, which is no mean feat considering the various unfavorable factors at play, including a sluggish China economy which saw a good start earlier in the year, sales dampened by the Nantong plant which had not resumed production following the fire, higher depreciation costs of the new plants in Mexico as they are still in the ramp-up stage, and currency appreciation, and increase in finance cost.

By end-market, sales to the aerospace, energy and medical end-markets amounted to HK$320 million, a 67.3% surge year-on-year. The strong growth was mainly attributable to the rebound of the global aerospace market boosting both mass production of new products and market share of the Company. The acquisition of Foshan Ameriforge last year also brought significant synergies, helping bolster business of the aerospace end-market, as well as brace the 230.5% soar in sales of the energy end-market. As for the diverse industrial end-markets, total sales amounted to HK$1.18 billion, up 10.5% year-on-year. The high horsepower engine end-market in particular, which benefited from the increasing demand for large power equipment, saw a 20.7% year-on-year increase in sales. The construction equipment and agricultural equipment end-markets registered had sales up by 27.7% and 16.3% year-on-year, respectively, thanks to the rise in demand recorded by the hydraulic orbital motor business, which the Company acquired in the second half of last year, and for construction equipment in the US. Sales to the automotive end-markets totaled at HK$900 million. The commercial vehicle end-market in Europe and the Americas recorded sales growth of 5.5%, partially offsetting the impacts from the decline in business in China’s passenger car end-market and the production halt at the Nantong factory after the fire.

The outlook is bright for the company. As of July 31, 2023, the company’s total orders in hand to be fulfilled in the next twelve months reached HK$4,046 million, a year-on-year increase of 11.4%. Impro Precision’s pre-emptive layout of the aerospace business is expected to achieve high, continuous growth upon full recovery of the global aerospace market. The precision machining, sand casting, and investment casting plants in Mexico have commenced operation, while the aerospace component plant and surface treatment plant will begin production next year, further enhancing the company’s global service capabilities.

Following a bottoming out of the company’s share price at HK$1.68 in March 2022, bullish momentum has been demonstrated, in complete contrast to the weak Hang Seng Index during the same period. At present, the company’s share price consolidates at a high level and has support above the stock year line. The moving average has retreated slightly and is waiting for a further increase. Obviously, the market recognizes the intrinsic value of the company, as reflected by the share price divergence from market trend.

By comparison, the company’s peer, Howmet Aerospace Inc. (NYSE: HWM), which mainly produces components for the aviation and transportation industries, has seen its share price hitting record highs since April 2020, confirming the industry’s strong prosperity and good profitability. The dynamic price-earnings ratio is as high as 38x, which shows that investors are extremely optimistic about Howmet Aerospace’s development. Impro Precision’s P/E ratio is only 8.6x after its listing, hence there is still tremendous room for growth.

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