The company released the 2023 semi-annual performance report: 23H1 achieved revenue of 824 million yuan, up 15.74% year on year; realized net profit of 89 million yuan, down 24.25% year on year; realized net profit of 77 million yuan after deducting net profit of 77 million yuan, down 22.26% year on year.
Revenue increased year-on-year in 23H1, and the differential business expanded rapidly. Among them, 23Q2 achieved revenue of 450 million yuan, an increase of 47% over the previous year, and an increase of 18% over the previous year; 23Q2 achieved net profit of 46 million yuan, an increase of 28% over the previous year, and an increase of 6% over the previous year. 23H1's automobile business accounts for 86.17% of revenue, and aviation business accounts for 13.96%. Among them, the differential business entered small-scale mass production in '22, 23H1 revenue increased 97% year on year, and commercial vehicle heavy truck business revenue increased 68% year on year as the industry recovered.
Profit margins are under pressure due to capacity building, and Q3 is expected to improve rapidly. 23Q2 The company's gross profit margin was 29.4%, year-on-year -5.5 pct, month-on-month, -2.5 pct; net interest rate was 10.2%, year-over-year -2.3 pct, and -1.2 pct.
Looking at the split business segment, the aviation parts business saw the biggest drop in gross margin, -20.28 pct over the same period last year. In addition, the company's financial expenses for the current period increased by about 22 million dollars, mainly to share interest expenses on convertible bonds.
Excluding the impact of financial expenses, profit margins have shown signs of improvement in the current period. At the same time, the amortization of heavy truck products and changes in the product structure of the aviation business also had an impact. As effects such as financial expenses are eliminated, Q3 profitability is expected to recover.
Demand side: Cooperate with leading new energy vehicle companies to build differential assembly suppliers. Benefiting from the rapid development trend of new energy sources, the company continues to develop new customers while accelerating product structure upgrades and expanding capacity boundaries. We have cooperated with leading new energy customers such as BYD, Geely, NIO, and Ideal. At the same time, the company has upgraded its products to create differential assembly products, which have equipment, the entire industry chain and cost advantages. The company's profitability is expected to increase steadily as the market share of customers increases.
Supply side: Release convertible bonds to expand production capacity, improve layout, and open up room for growth. The company actively promoted the construction of a new base, issued convertible bonds with a proposed total investment of 1,058 million yuan, and built the first phase of the automobile differential assembly project. It is planned to build 5 million sets of automobile differential products per year, including differential case casting, machining production lines, planetary semi-axle gear forging, and machining production lines. The company's increase in differential production capacity is conducive to increasing market share, improving the supply system for the NEV industry at home and abroad, and fully enjoying the dividends of the times when the global NEV industry is advancing at an accelerated pace.
Investment suggestions: The company's production capacity continues to expand, the customer structure is excellent, and it is building a supplier of differential assemblies.
The estimated revenue for 2023-2025 is 20.0/25.8/3.17 billion yuan, corresponding to net profit of 2.4/34/450 million yuan, and the current market value corresponding to PE 2023-2025 is 17.1/12.2/9.1.
First coverage, giving a “buy” rating.
Risk warning: Prices of raw materials are rising, production capacity is falling short of expectations, customer expansion falls short of expectations, and sales of new energy vehicles fall short of expectations.