Event description

On August 18, 2023, the company released the semi-annual report of 2023: operating income of 1.567 billion yuan, year-on-year + 29.76%; net profit of 81 million yuan, + 62.14%; and deduction of non-return net profit of 77 million yuan, + 52.07%. Among them, Q2 realized operating income of 828 million yuan, year-on-year + 39.57%, month-on-month + 12.08%; realized return-to-mother net profit of 45 million yuan, year-on-year + 101.31%, month-on-month + 22.93%; realized non-return net profit of 47 million yuan, year-on-year + 79.89%, month-on-month + 57.46%.

Event comment

Benefiting from the big wave of automobile electric intelligence, the performance of automotive cable leader has improved rapidly. From a product point of view, the company's 2023H1 ordinary line and new energy line achieved operating income of 1.362 billion yuan and 145 million yuan respectively, + 29.13% and + 24.03% respectively over the same period last year, and gross profit margins of 11.35% and 18.79% respectively, compared with the same period last year. + 0.94pct and + 2.31pct respectively, upstream raw material prices fell, gross profit margin increased. Because the working voltage of high voltage cable of new energy vehicle is 600V or even 1000V, and it needs high temperature resistance, corrosion resistance, shielding performance and electromagnetic compatibility of vehicle electrical system and other factors, new energy vehicle high voltage cable is more valuable than traditional automobile cable. High-voltage cable not only has high added value, but also belongs to the pure incremental market. In addition, with the improvement of intelligence, a large number of sensors, controllers, actuators and other related components will be added, which will greatly increase the demand for products such as low-voltage power lines, data cables, high-speed and high-frequency cables, and the market space for automotive cables will continue to improve. As the leader of the domestic automobile cable industry, the company has strong customer resource advantages and capacity reserves, and is expected to continue to benefit from the increased demand for all kinds of cables brought about by the development of automobile electric intelligence.

The cost control ability of the company is excellent, and the profitability under the "cost plus" mode is guaranteed. The company's 2023H1 gross profit margin and net profit margin were 11.96% and 5.19% respectively, compared with the whole of the previous year, + 1.11pct and + 0.94pct respectively. Among them, Q2 gross profit margin and net profit rate are 12.46% and 5.42% respectively, compared with the same period last year, + 1.36pct and + 1.66pct respectively, and month-on-month comparison are + 1.06pct and + 0.48pct, respectively. As the company adopts the "cost plus" pricing model, the fluctuation of raw material prices has relatively little impact on the company's profits, and the stability of the company's profits is guaranteed. The company's 2023H1 sales, management, finance, and R & D expense rates are 0.69%, 1.90%, 2.27%, 0.93%, respectively, compared with + 0.02/+0.28/-0.13/-0.80pct in the same period last year. The increase in management expenses is mainly due to the increase in labor costs caused by the provision of equity incentive fees, and the decrease in financial expenses is mainly due to the reduction of interest provision after convertible debt into equity. The company's excellent cost control ability, superimposed upstream raw material prices decline, performance is expected to further improve.

Production capacity continues to increase, and the advantages of location and layout further enhance the competitiveness of products. Since its inception, the company has been deeply ploughing the automotive cable industry, is a professional automotive cable manufacturer integrating R & D, production and testing, and has strong customer resources. At present, the company's main production bases include Ninghai, Benxi, Shanghai, Huizhou and Chengdu. At the same time, a new production base will be built in Macheng, Hubei, and the production capacity will be further increased.

The production base is located in the automobile industry cluster, which can achieve close docking with downstream customers. The advantages of location layout and rapid response will further enhance the market competitiveness of the company's products. We expect that the new energy vehicle market will maintain a high growth rate in the future, the market space for automotive cables is expected to continue to increase, and the company's medium-and long-term performance is expected to maintain high growth.

Investment suggestion

We maintain our profit forecast and expect the company's net profit for 2023-2025 to be 2.06 pound 2.73 yuan / 358 million yuan, corresponding to EPS 2.32 pound 3.07 pound 4.03 yuan, corresponding to the closing price of 52.19 yuan on August 17, and PE 22.5 pound 17.0 pound 12.9 respectively, maintaining the "buy-A" investment rating.

Risk hint

The impact of large fluctuations in raw material prices, lower-than-expected sales in the downstream automobile market, and so on.