Main points of investment
Event: the company released its mid-2023 report, with revenue of 332 million yuan (year-on-year-21.39%) and net profit of 45 million yuan (year-on-year-48.55%) in the first half of 2023; 2023Q2 realized revenue of 170 million yuan (year-on-year-30.87%) and net profit of 12 million yuan (- 78.64%) in a single quarter.
Comments: customers go to inventory to suppress communication terminal demand, automotive business products customer development is smooth, proposed convertible bond financing to develop automotive business. 2023Q2, communication downstream customers take the initiative to inventory, resulting in low capacity utilization, income, gross profit margin and so on. At present, the customer inventory of the communications business has reached a reasonable level, with the continuous release of QSFP-DD 112G/OSFP-DD/OSFP and other new products developed by customers. Customers and products of the automotive business have been successfully developed, and new projects such as BMS modules and water-cooled plates have been added, which are expected to gradually contribute to incremental performance. At the same time, the company plans to issue convertible bonds to raise no more than 795 million yuan for the construction of new energy auto parts production and construction projects, so as to lay the foundation for the development of new automobile products.
In the long run, in terms of communications, deeply bound to the North American 800G connector giant, customized properties enjoy strong bargaining, Malaysia production capacity to serve global communications customers. The company's new 112G shell and precision structure products make up of high-speed Istroke O connectors, and 800g optical modules plug in and use, will directly benefit from the outbreak of demand for 800G optical modules driven by AI. In June 2023, the company announced that the communication connector shell CAGE QSFP 112G series has been trial-produced in small batches. At the same time, the Malaysian subsidiary is going through the relevant procedures, the relevant personnel and supporting machinery and equipment have been settled, and gradually start the mold parts processing business, and will serve global communications customers in the future.
In terms of automobiles, automotive connector customers and products have been developed smoothly, profoundly benefiting from the wave of intelligent network connection. With the automobile electrification and intelligent network connection, the demand of high-voltage and high-speed connector industry continues to grow, and the domestic substitution is accelerated. Relying on years of precision manufacturing experience and technical advantages, the company has successfully transformed into Tire1 brands. The company's customers are speeding up their breakthroughs. In addition to the original electric control and motor module products, the company will increase battery structure and component products such as battery management module, water-cooled plate project in 2023, and horizontally develop BMS business module of Morse, and obtain the BMS Gen6 project, which is currently in the stage of small batch trial production.
Investment suggestion: we have adjusted our profit forecast. It is estimated that in 2023-2025, the company's net profit will be 1.50,3.53 and 420 million yuan, corresponding to the closing price PE of 40.4,17.2 and 14.4 times on August 16. With the arrival of the operating inflection point in the third quarter, pessimistic expectations have been fully released to maintain the "overweight" rating!
Risk tips: the price of raw materials has risen sharply, customer development is not as expected, and the landing of 112G products is not as expected.