Incidents:

The company released its 2022 annual report. In 2022, the company achieved revenue of 907 million yuan, an increase of 16.81% over the previous year; Fumo's net profit was 122 million yuan, an increase of 16.6% over the previous year; net profit after deduction was 114 million yuan, an increase of 10.61% over the previous year. Among them, Q4 achieved revenue of 277 million yuan in a single quarter, an increase of 14.44% over the previous year; Guimo's net profit was 38 million yuan, an increase of 4.17% over the previous year; after deduction, Fumo's net profit was 33 million yuan, a year-on-year decrease of 8.34%.

The company released its report for the first quarter of 2023. In the first quarter of 2023, the company achieved revenue of 205 million yuan, an increase of 6.48% over the previous year; Guimu's net profit was 23 million yuan, an increase of 6.98% over the previous year; and after deduction, Fumo's net profit was 22 million yuan, an increase of 9.3% over the previous year.

Revenue side: Achieved revenue of 907 million yuan in '22, +16.81% year on year, with steady growth. The company achieved annual revenue of 907 million yuan, +16.81% year on year, of which the fuel hose business achieved revenue of 218 million yuan, -2.5% year on year, and the cooling hose business achieved revenue of 578 million yuan, +34.59% year on year. In 2022, against the backdrop of high sales of new energy vehicles in China, the company's fuel business experienced a certain decline due to the decline in fuel vehicle sales, while the cooling hose business benefited from rapid growth in the volume of new energy customers.

The 23Q1 company achieved revenue of 205 million yuan, +6.48% year on year. The revenue growth rate declined compared to '22, mainly due to factors such as the epidemic, declining subsidies, early overdraft requirements for the purchase tax halving policy, price cuts, etc., which led to the relative weakness of automobile consumption in the first quarter.

Gross profit margin: The gross margin for '22 was -1.74pct year-on-year, mainly due to rising raw material costs and fuel costs. The gross profit margin in '22 was 23.46%, -1.74pct year on year. There are two main reasons for the decline in gross margin: 1) Affected by international and domestic oil prices, the prices of the main raw materials of the company's products rose, product manufacturing costs rose, and profit margins fell; 2) Due to the influence of international energy, the price of raw coal rose. The fuel in the company's old plant was raw coal. The fuel for the new plant in 2022 was natural gas, and the price of natural gas was higher, causing fuel costs to rise in 2022.

The company's gross margin in 23Q1 was 23.21%, an increase of 2.8 pct over the previous year. The year-on-year improvement in gross margin was mainly due to a certain decline in raw material prices.

On the profit side: +16.6% year-on-year profit in '22. In 2022, the company's net profit was 122 million yuan, an increase of 16.6% over the previous year. Profit growth was achieved in the context of declining gross margin, mainly due to two reasons:

1) The company's expense ratio declined significantly in '22 (-1.1 pct year on year). Among them, the sales expense rate/management expense rate/financial expense rate/R&D expense ratio were 2.1%/3.33%/-0.45%/3.8%, respectively. The year-on-year change of -0.13pct/-0.2pct/-0.42pct/-0.34pct was clearly due to an increase in interest income and exchange income (a total increase of 4.07 million yuan in '22 compared to '21); 2) The company's other income in '22 was 15.86 million yuan. The year-on-year rate of +25% was mainly due to the increase in government subsidies.

In 23Q1, the company achieved net profit of 23 million yuan, an increase of 6.98% over the previous year and a decrease of 40.26% from the previous month. The car market weakened in the first quarter, and the net profit of Gimu declined significantly in 23Q1.

New energy vehicle pipelines continue to be released, and the energy storage business is expected to become the second growth curve. In terms of new energy vehicles, the company has established long-term and stable cooperative relationships with leading new energy customers such as BYD, Ideal, GAC Aian, Changan Deep Blue, and Jikrypton. It is expected that various cooperative models will be released in 23, contributing significantly to the company's automotive pipeline business. In terms of energy storage, the company is actively seizing energy storage growth opportunities and vigorously expanding energy storage customers. In '22, the company was able to supply related products in batches. In the future, the company will continue to make use of technical advantages such as the formulation of automotive piping systems to increase the development and expansion of pipeline system products in the field of energy storage and increase the added value of such products, thereby increasing the company's profit level. The energy storage business is expected to become the company's second growth pole.

Investment advice and profit forecast: The company's new energy vehicle business has contributed significantly to the company, compounded by the rapid growth in the scale of the energy storage business. The company's revenue for 2023-2025 is estimated to be 1,398 million yuan, 19.86 billion yuan, and 2,455 million yuan respectively, while net profit attributable to the mother is 2004, 304, and 397 million yuan in that order. Corresponding to the current market value, PE is 16.6, 11.1, and 8.5 times in that order. Maintain an “increase in holdings” rating.

Risk warning: There is a risk of macroeconomic fluctuations, the price of raw materials has risen sharply, sales of downstream new energy vehicles have fallen short of expectations, the launch of new production capacity has not met expectations, the chip shortage problem continues, and the progress of new product development falls short of expectations.