The company's recent situation

The company announced that it has recently completed its third share repurchase plan. Of these, 50% of the number of repurchases will be cancelled, and 50% will be used to implement employee incentives later. The total amount of this repurchase reached 100 million yuan.

reviews

Buybacks are used to motivate employees and highlight the R&D-driven corporate style. The company issued an announcement to complete the latest share repurchase. Since 2022, the company has implemented a total of three share repurchase plans, with a total repurchase amount of 300 million yuan. Of these, the first two share repurchases were used to implement employee stock ownership plans or equity incentive plans. 50% of the number of share repurchases this time was used for cancellation, and 50% was used for subsequent implementation of employee incentives. We believe that the company's large repurchases are used to motivate employees, fully demonstrate the company's corporate culture that values talents, and help further bind the company's core backbone. During the period 2020-2022, the company continued to expand its R&D team, with R&D personnel accounting for 78.2% in 2022. We believe that the company needs to continuously increase investment in R&D personnel in various fields to expand its international business and deploy the field of electrification and intelligence. Employee incentives can help attract talents and enhance team stability.

Internationalization capabilities lead the industry, and overseas markets are expanding at an accelerated pace. Judging from the regional layout, the company has rich overseas genes. Since establishing Alte's Japanese subsidiary in 2001, it has now set up R&D centers in Japan, the US, and Italy, and set up a joint venture in Malaysia. Judging from product cooperation, the company has completed research and development of a pure electric platform for an internationally renowned car company, and parts have successfully entered the domestic joint venture supply chain of an internationally renowned car company. At the same time, the company has developed in-depth cooperation with many world-renowned brands and carried out overseas market cooperation with many foreign companies such as SUNSURIA in Malaysia. We believe that the company's “technology+supply chain” global layout strategy is expected to help the company further integrate into overseas markets and look forward to the future. With the company's ongoing development cooperation in Europe, the Middle East, Southeast Asia and other regions, the company's overseas design business is expected to experience rapid growth.

In line with the AI industry, big models+machine learning help vehicle design reduce costs and increase efficiency. With the recent development of AI big model technology, the company is actively applying artificial intelligence technology. At present, the company conducts model training based on a large number of high-order and high-quality vehicle development databases, and has applied various AI software based on AIGC to project development to improve project development efficiency; at the same time, the company assists CAE simulation to optimize vehicle models through machine learning. We believe that the automobile R&D and design industry accounts for a relatively high labor cost, and the labor costs of the company's vehicle R&D and design business remained at about 40% in 2020-2022. Through the use of AI technology, it is expected that labor costs will be reduced while improving R&D effectiveness while reducing costs and increasing efficiency.

Profit forecasting and valuation

The 2023 and 2024 earnings forecasts remain unchanged. The current stock price corresponds to 29.0 times/21.7 times P/E in 2023/2024. Maintaining an outperforming industry rating, since the company's buybacks boosted confidence in development, we raised the target price by 9.9% to 15.50 yuan, corresponding to 36.0/26.9 times the 2023/2024 P/E. There is 24.1% room for improvement compared to the current stock price.

risks

Overseas market expansion fell short of expectations, application of artificial intelligence technology fell short of expectations, and demand in the terminal market was insufficient.