Incident Overview: On April 25, '23, the company released its '22 annual report and '23 quarterly report. The company achieved revenue of 2,948 billion yuan in '22, +30.01% year on year. Among them, 22Q4 company's revenue was 888 million yuan, +28.65% year-on-year /+4.12%; Guimu's net profit was 39 million yuan, +172.51% /-23.42% month on month. 23Q1 achieved revenue of 739 million yuan, +20.29% year on year, and net profit of the mother was 36 million yuan, +30.84% year on year.

The volume of high-voltage cables and new energy empowered a steady upward trend in performance. 1. Revenue side: Regular line revenue in '22 was 2,505 billion yuan, +29.14% year on year, due to the recovery of the domestic automobile industry and the rapid growth of passenger cars driving the company's product sales; new energy line revenue was 330 million yuan, +54.40% year on year, sales volume was 232,400 kilometers, +54.70% year on year, unit price 1419.99 yuan/km, -6.71% year on year, due to the growth of new energy vehicles; data line revenue was 0.07 billion yuan, -4.83% year on year. 2. Profitability: The company's gross profit/net interest rate in '22 was 12.02%/4.75%, compared to +1.11Pcts/+0.94Pcts, of which the gross margin for the regular line/new energy line was 11.31%/20.74% respectively, and +1.22Pcts/+4.43Pcts. The overall increase in profitability was mainly due to continuous optimization of the product structure and the continuous increase in the share of new energy line products with high gross margin (+1.77Pcts compared to +1.77Pcs). 3. Period expenses: In '22, the company's three-fee expense ratio was 3.45%, compared to -0.51 Pcts. Among them, the sales/management/R&D/financial expenses ratio was 0.41%/1.63%/2.38%/1.41%, respectively, and -0.46 Pcts/+0.08 Pcts/+0.05 Pcts/+0.05 Pcts/-0.13 Pcts, and the cost management and control capabilities continued to improve.

The 23Q1 performance was in line with expectations, and profitability continued to be realized. 1. Revenue side: In 23Q1, the company achieved revenue of 739 million yuan, +20.29% over the same period last year, which was driven by the increase in sales scale. 2. Profitability: 23Q1 achieved net profit of 36 million yuan to the mother, +30.84%/-6.36% year-on-month respectively. The gross profit/net interest rate was 11.40%/4.94%, +0.52 Pcts/+0.40 Pcts compared to the previous year, due to the continuous increase in the share of new energy cables. 3. Period expenses: 23Q1 The company's three-fee rate was 4.30%, -0.49 Pcts compared to -0.49 Pcts. Continuous optimization. Among them, the sales/management/R&D/finance expense ratio was 0.62%/2.08%/2.16%/1.60%, respectively, and -0.08 Pcts/+0.24 Pcts/-0.28 Pcts/-0.65 Pcts.

Electronics and intelligence are driving the expansion of the low-voltage cable industry, and new energy is empowering the increase in demand for high-voltage cables. The company's multi-dimensional competitive advantage is remarkable, and production capacity has helped its performance continue to increase. The low-voltage cable industry is rapidly expanding. The company is a leader in the domestic cable industry. It has multi-dimensional core barriers, and is expected to enjoy domestic substitution dividends: 1) Qualification barriers: Kabaiyi has passed product certification from many mainstream international automakers; 2) Financial barriers: the company has sufficient operating capital to effectively connect the upstream and downstream of the industry; 3) Technical barriers: By the end of '22, the company had obtained 35 utility model patents and 7 invention patents. The penetration of new energy vehicles is accelerating, and high-voltage cables will continue to benefit as the core products of new energy vehicles. Relying on multi-dimensional competitive advantages, the company has entered the supply chain of many automakers such as BYD, Tesla, Geely, and Mercedes-Benz.

Furthermore, the company launched fund-raising plans in 2020 and 2021, and production capacity quickly climbed from 3.13 million kilometers (2019) to 6.12 million kilometers (2021). The expansion of the traditional cable industry and the entry of high-voltage cable products into the steady mass production stage helped the company's performance continue to improve and its market share further increased.

Investment suggestions: The company's new energy products are being launched at an accelerated pace, and profitability continues to increase. We have raised our profit forecast for 23/24. It is estimated that the company will achieve net profit of 2.18/3.23/490 million yuan in 23-25. The current market value corresponds to PE 22/15/10 times 2023-2025. The company is a domestic leader in the automotive cable industry. New energy products are rapidly being released, new production capacity is being built at an accelerated pace to expand growth space, and maintain a “recommended” rating.

Risk warning: Gross margin declined as raw material costs exceeded expectations; sales of new energy vehicles fell short of expectations, leading to insufficient downstream demand; gross margin fell short of expectations due to the proportion of special cable products falling short of forecasts.