The company released its 2022 annual report and the first quarter report of 2023. In 2022, it achieved revenue of 2.01 billion yuan, +106% year on year, net profit of 25 million yuan, -47.5% year on year, net profit of non-return to the mother - 29 million yuan; Q1 of 2023 achieved operating income of 260 million yuan, -26.9% year on year, net profit of Guimo - 13 million yuan, net profit of non-homo - 16 million yuan.

Comment:

Revenue growth continued in 2022, and profitability was under short-term pressure. In 2022, the NEV industry continued to enjoy high prosperity. The company's production and sales were booming, the share of assembly products increased, and revenue increased significantly. Profitability declined due to factors such as WM Motor and Reading Motor, which calculated asset impairment of 120 million yuan, compounded by share payments (0.2 billion yuan) and increased competition in the industry. The company achieved annual revenue of 2.010 billion yuan (+106% year-on-year), net profit of 025 million yuan (-47.5% year-on-year), gross profit margin of 16.2% (-4.5pct), net profit margin of 1.2% (year-on-year -3.6pct); revenue of 2.6 billion yuan (-26.9% year-on-year) in Q1 '23, net profit of -13 million yuan, gross margin of 17.0% (+0.8pct), net interest rate of -5.0%.

Seize the trend of aggregation and achieve high revenue growth. In 2022, the company's electric drive assembly (including motor controller and all-in-one drive assembly) sold 374,000 units (+95.7% year on year), market share 5.4% (+1.0pct year on year), revenue of 560 million yuan (+156% year on year), accounting for 27.9% (+5.5pct year on year); power assembly sales volume was 564 million units (+201% year on year), market share of 8.6% (+2.3pct year on year), revenue of 670 million yuan (+138% year on year), accounting for 33.5% (++138% year on year) t). The company continues to invest heavily in R&D, has developed an “integrated core” six-in-one drive system with significant advantages such as high efficiency, lightness, and low cost, and has been targeted by many car companies such as Geely, SAIC Chase, Jianghuai, Dongfeng, Hezhong, Nacha, etc., and is expected to increase overall profitability as the share of next-generation products gradually increases.

Issue convertible bonds to build advanced production capacity and lay the foundation for performance growth. In April 2023, the company announced plans to issue convertible corporate bonds to unspecified targets. It plans to raise 820 million yuan for the NEV powertrain automation workshop construction project and supplement working capital. After the project is completed, it will add production capacity of 200,000 third-generation electric drive assemblies and 400,000 third-generation power assembly products per year.

This convertible bond helps the company follow development trends such as high pressure and integration. Through the introduction of intelligent and automated production lines, the company's costs will be further reduced and profit levels increased.

Profit forecast: As a leading supplier of electric drives and power supplies in China, the company is expected to continue to benefit from the electrification process of the automotive industry. We expect the company's net profit to the mother in 2023-2025 to be 135, 227, and 346 million yuan, and the corresponding PE is 34, 20, and 13 times, respectively.

Risk factors: Fluctuations in raw material prices, production capacity release falling short of expectations, customer development falling short of expectations, and sales of supporting models falling short of expectations.