The company released its 2022 performance report, which achieved revenue of 4,240 million yuan in 2022, or 2.81% year on year (without audit, same below); achieved net profit of 82 million yuan, -27.43% year on year; of this, revenue for the single quarter of 2022/Q4 was 1,342 million yuan, +15.09% year on year, +16.70% month on month; net profit attributable to Fumo was 26 million yuan, +116.67% year on year, +13.04% year on month. Performance continued to recover from the same period on the same period, in line with expectations. The company is a leader in thermal management for large and medium passengers in China. In recent years, it has vigorously developed battery thermal management systems for energy storage power plants, and has been selected by customers such as Ningde Shidai and Vision Energy, which is expected to significantly improve the company's performance; the car business air conditioning box project is also progressing smoothly. We maintain the 2023/24 EPS forecast at 0.27/0.41 yuan, give 35 times the PE of 2023, maintain the target price of 9.5 yuan, and maintain the “buy” rating.

Performance continued to improve month-on-month, in line with expectations. On February 28, the company released a performance report. In 2022, the company achieved revenue of 4.240 billion yuan, or 2.81% year-on-year (without audit, same below); achieved net profit of 82 million yuan, -27.43% year on year; of these, 202Q4 single-quarter revenue was 1,342 million yuan, +15.09% year-on-year, +16.70% year-on-month; net profit attributable to Guimu was 26 million yuan, +116.67% year-on-year, +13.04% month-on-month, benefiting from the continuous mass production and delivery of box air conditioners in the small car division, and the company's business bottomed out. The performance was in line with expectations. Looking ahead to 2023, the number of air conditioning boxes shipped by the company's trolley division continues to increase, combined with the volume of energy storage and heat management shipments of new energy heavy trucks, and performance is expected to continue to grow.

New energy customers in the trolley thermal management business continue to expand, and research and development is progressing smoothly. The company's car division adheres to the “passenger car division” business strategy. On the one hand, it is deeply involved in existing commercial vehicle customers such as JAC, Beiqi Futian, Dongfeng Liuqi, and Sinotruk, and on the other hand, it continues to expand customers in the passenger car field. The company's current customers in the passenger car sector include leading OEMs such as Volkswagen, GM, Honda, SAIC, and GAC, as well as new energy vehicle companies such as BYD, NIO, and Huawei. Commercial vehicle sales are expected to bottom out in 2023, and air conditioner box shipments from core incremental passenger car customers such as BYD and NIO are expected to increase rapidly. At the same time, there are plenty of orders for cars in hand. In the first half of 2022, the car thermal management business segment received more than 2 billion yuan in new orders. Furthermore, the company invested 88 million yuan (88% shareholding ratio) to establish the joint venture Matsushiba Kuheng, and injected electric compressor-related business into Matsushiba Kuheng to accelerate the development of the electric compressor business, raise the level of self-control, and further increase profits.

Large and medium customers have bottomed out, and the energy storage and heavy truck heat management business continues to advance. In 2022, due to the spread of the epidemic and the reduction in local fiscal spending on public travel, government public transportation procurement was still low. In this context, while stabilizing the market advantage of Tier 1 and 2 cities, the company penetrated into the market of Tier 3 and 4 cities. The 1H22 large and medium-sized bus thermal management system sold nearly 12,000 sets, which is basically the same as the same period last year, and the company's market share has further increased. As the impact of the epidemic continues to ease, large and medium passenger shipments are expected to bottom out in 2023.

On the other hand, the company is actively developing new business fields such as battery thermal management systems for energy storage power plants, relying on its own technology accumulation in the field of battery thermal management from Dazhong Electric. Currently, two types of energy storage thermal management have been mass-produced, and have entered the supplier system for customers such as Ningde Times and Envision Energy. At the same time, the thermal management shipment volume of new energy heavy trucks is also expected to remain high along with the rapid growth of new energy heavy trucks.

Risk factors: Decline in the prosperity of the automotive industry; product development progress falls short of expectations; new products and new customer expansion falls short of expectations.

Investment advice: The company is a leader in thermal management for large and medium-sized buses in China. The company's performance is under pressure due to low demand for passenger cars and rising raw material prices and the impact of the epidemic. Looking ahead to 2023 and beyond, the company's large and medium passenger business is expected to bottom out. As the trolley division continues to mass-produce and ship air conditioning boxes for core customers, the superimposed commercial vehicle business is expected to pick up, and the company's performance is expected to continue to improve. Furthermore, the company is vigorously developing battery thermal management systems for energy storage power plants. It has now been selected by customers such as Ningde Times and Envision Energy, which is expected to significantly improve the company's performance and valuation. We maintain the 2023/24 EPS forecast at 0.27/0.41 yuan. According to Wind's consistent expectations, the average PEG value for the comparable company Gaolan shares, Invik, and Tongfei shares is 0.6. According to our compound growth forecast for the company's 2023-2024 performance, we conservatively gave the company 35 times PE in 2023, maintaining the target price of 9.5 yuan, and maintained the “buy” rating.