Core views:

The company's 23Q1 revenue growth rate was +5.9% year on year, and the year-on-year growth rate of net profit returned to the mother for the quarter was corrected for the first time, showing impressive performance. According to the first quarterly report, the company achieved operating income of 980 million yuan in Q23, +5.9% year on year, and achieved net profit of 100 million yuan/100 million yuan after deduction, +11.9%/+4.4% over the same period last year. According to statistics from the China Automobile Association, 23Q1 truck wholesale sales volume was -3.9% yoy /+21.0% month-on-month. Among them, wholesale sales of medium and heavy trucks were +1.5% yo/ +60.2% yoy, and light truck wholesale sales were +1.8% yo/ +24.4% month-on-month. The company's revenue growth rate was better than the growth rate of the domestic truck industry. We think the main reason was an increase in the market share of crankshafts and connecting rods and an increase in export revenue.

The company's profitability improved month-on-month. The 23Q1 company's gross profit margin was 24.1%, +0.7pct/month-on-month +3.5pct. The main reason was the gradual recovery in capacity utilization brought about by the recovery of the industry; the net interest rate of return to the mother was 10.7%, +0.6pct/month-on-month +5.4pct; and the sales/management/R&D/financial expenses ratio was 0.9%/4.0%/6.0%/0.3%, respectively 0/-0.1/0/+0.5pct year-on-year.

The main crankshaft & connecting rod business has benefited from industry recovery+internationalization, and employee shareholding mobilizes employees' enthusiasm.

The company is the largest manufacturer of commercial vehicle crankshafts and expansion links in China. The main crankshaft & connecting rod business will benefit from the recovery of the commercial vehicle industry and the improvement of competitiveness in the direction of internationalization. The company introduced a suspension system technical team to enter the air suspension track and open up room for growth. In addition, the company announced the 2023 Employee Stock Ownership Plan (draft). It intends to transfer no more than 21.440 million shares to the company with no more than 244 employees, and the price for the transfer company to repurchase shares is 2.73 yuan/share. The ownership of personal performance is linked to the completion of the company's (or second main business/emerging business subsidiary) performance assessment indicators and individual performance evaluation results, which is conducive to motivating employees.

Profit forecast and investment advice: The company is a domestic crankshaft & connecting rod leader. The traditional main business has benefited from industry recovery+internationalization, and air suspension is the main focus. The company's EPS for 23-24 is expected to be 0.33/0.47 yuan/share. Referring to the company's historical valuation, comparable company valuations, and future company space, the company will be given 25 times PE. The corresponding reasonable value is 8.15 yuan/share, maintaining the “buy” rating.

Risk warning. Industry sentiment fell short of expectations; overhang fell short of expectations; industry competition intensified.