Event: the company issued an announcement on the pre-increase of its annual performance in 2023.

The performance is better than the market expected. The company's estimated net profit for the first half of the year is 375-415 million yuan, an increase of 75.9% over the same period last year, an increase of 94.7% over the same period last year. It is estimated that the non-return net profit will be deducted from 370% to 410 million yuan, up 98.8% from 120.3% to 246 million yuan, 60.3% to 91.5% over the same period last year, and 21.4% to 45.0% from a month earlier. The non-return net profit is expected to be deducted from RMB 2.17-257 million, an increase of 75.9%, 108.3% and 42.2%, respectively, compared with the same period last year. According to the company announcement, the company's previous development of new energy and smart driving project orders continued to increase, superimposed the positive impact of exchange rate and other external factors, led to the substantial growth of the company's performance.

Speed up the layout of new energy, electricity and large-scale structural products, new energy vehicle products are expected to become an important growth point of the company. While maintaining the advantages of small and medium-sized parts, the company focuses on speeding up the layout in the field of new energy vehicles and intelligent vehicles, basically realizing full coverage of aluminum alloy precision die castings in the fields of new energy three electricity system, thermal management system, intelligent driving system, on-line steering / braking system, automobile structural parts and so on. The company continues to open up new energy customers, has entered the customer supplier pool of North American complete vehicle plant, and cooperated with new energy customers such as Ningde era, Honeycomb easy to create, Huichuan Technology, NIO Inc., ideal, Zero run, Canoo and other new energy customers; in line with the trend of large-scale integrated die casting, the company plans to introduce medium and large-scale lean die-casting units of 800T-8400T to enhance its competitiveness in the field of integrated die-casting. By April 2023, there were 10 large-tonnage die-casting machines in place. According to the company announcement, the company strives to increase the revenue share of new energy vehicle products represented by new energy vehicle structural components and core components of the three power systems to more than 30% in 2025 and will reach 70% in 2030. It is expected that new energy vehicle products will become an important growth point of the company.

We will promote the construction of a production base in Mexico and expand market share in North America. According to the company announcement, the first phase of the company's production base in Mexico is expected to be put into production in the second quarter. The company plans to set up a new subsidiary in the state of Guanajuato, Mexico, and plans to issue shares to specific objects to raise no more than 1.2 billion yuan, which will be used to build a production base for the structural parts of new energy vehicles and three-electric system in Mexico to raise investment projects. after reaching production, it will increase the production capacity of 1.75 million new energy vehicle structural parts per year and 750,000 new energy vehicle three-electricity system parts per year. It is expected that the annual sales income will increase by 1.439 billion yuan and the annual net profit will be 175 million yuan after reaching production. On the one hand, the Mexican production base project will help the company to expand its market share in North America, expand its layout and promote strategic transformation in the field of new energy vehicle structures and three electric system parts; on the other hand, it will help the company to strengthen the deep global cooperation with large global multinational auto parts suppliers and new energy mainframe factories, consolidate the existing competitive position and lay a solid foundation for long-term development.

By adjusting the expense rate, it is predicted that the EPS in 2023-2025 is 0.95,1.25,1.60 yuan (formerly 0.97,1.28,1.65 yuan). According to the 23-year PE valuation, the company's 23-year PE average valuation is 33 times, the target price is 31.35 yuan, and the purchase rating is maintained.

Risk hint

The sales volume of the passenger car industry is lower than expected, the matching income of automobile aluminum alloy castings is lower than expected, the income of new energy vehicle products is lower than expected, and the production time of fund-raising projects is later than expected.