Incident: The company released its 2022 annual report, achieving revenue of 3.22 billion yuan (+75.2%) in 2022 and net profit of 400 million yuan (+171.9%); of this, Q4 2022 achieved revenue of 1.14 billion yuan (+92.5%) in a single quarter, and Guimu's net profit of 183 million yuan (+285.8%).

The high boom in photovoltaics and new energy vehicles has led to a sharp increase in the company's performance. 1) By industry, in 2022, the company achieved revenue of 1.77 billion yuan in the photovoltaic sector, an increase of 88.7% over the previous year; the new energy vehicle sector achieved revenue of 800 million yuan, an increase of 315.4% over the previous year; the consumer electronics sector achieved revenue of 230 million yuan, a decrease of 7.7% over the previous year; and the security sector achieved revenue of 360 million yuan, a decrease of 12.6% over the previous year. 2) By product, in 2022, the company's precision die-casting structural parts business achieved revenue of 1.29 billion yuan, an increase of 57.4% over the previous year; the precision injection molded structural parts business achieved revenue of 960 million yuan, an increase of 68.1% over the previous year; the profile stamping structural parts business achieved revenue of 890 million yuan, an increase of 114.7% over the previous year; and the precision mold business achieved revenue of 0.6 billion yuan, an increase of 165.9% over the previous year.

Profitability has increased significantly. 1) The company's overall gross margin in 2022 was 21.7%, an increase of 2.6pp over the previous year. Among them, Q4 single-quarter gross margin was 23.7%, up 1.5pp over Q3. 2) The cost rate during 2022 was 8.1%, down 1.4 pp from the previous year. Among them, the sales expenses rate was 0.9%, down 0.3 pp from the previous year, the management expenses rate was 2.6%, down 0.8 pp from the previous year, the R&D expenses rate was 4.1%, up 0.4 pp from the previous year, and the financial expenses rate was 0.5%, down 0.7 pp from the previous year. 3) In terms of net interest rate, the company's overall net interest rate in 2022 was 12.5%, an increase of 4.5 pp over the previous year. Among them, the net interest rate for a single quarter in Q4 was 16.1%, up 4.0 pp from Q3.

The company's current development is mainly limited by production capacity, speeding up the construction of domestic and foreign production capacity. The company currently has 8 production bases in China, of which the new production bases in Jiangxi and Anhui were put into operation one after another at the end of 2022. The company will mainly build domestic production bases in 2022, and the deployment and construction of overseas production bases will be accelerated in 2023, mainly including Mexico in North America and Hungary in Europe to expand the production capacity of overseas production bases.

Profit forecasts and investment recommendations. It is estimated that the company's net profit to the mother in 2023-2025 will be 740, 11.53 billion yuan, and 1,577 billion yuan respectively, and the corresponding EPS will be 1.85, 2.88, and 3.94 yuan respectively. The net profit attributable to the mother will maintain a compound growth rate of 58% over the next three years. The company is a leading domestic one-stop multi-process precision structural parts enterprise, and maintains a “holding” rating.

Risk warning: risk of fluctuations in raw material prices; risk of increased market competition; risk of large accounts receivable and inventory size, etc.