Overview of events

The company issued a half-year performance announcement for 2023: 2023H1 achieved revenue of 1.61 billion yuan, year-on-year + 13.0%; net profit of 120 million yuan, + 51.9%; and non-return net profit of 100 million yuan, + 39.9% of the same period last year.

Analysis and judgment:

Continued high performance improvement in profitability

Revenue side: the company's 2023H1 achieved revenue of 1.61 billion yuan, + 13.0% year-on-year; net profit of 121 million yuan, + 51.9% year-on-year, in line with the median of previous performance forecasts; deducting non-return net profit of 100 million yuan, + 39.9% of the same period last year. Of which 23Q2 revenue is 790 million yuan, year-on-year + 1.6%, month-on-month ratio-4.3%; achieve a net profit of 65 million yuan, + 51.7% year-on-year, month-on-month + 17.5%. We judge that the continued high revenue growth compared with the same period last year is mainly due to the substantial growth of the company's automotive sector business driven by the increase in downstream customer sales.

Profit side: the company's 2023H1 gross profit margin is 18.4%, year-on-year + 1.6pct; net profit rate is 8.3%, year-on-year + 2.8pct; 23Q2 gross profit margin is 18.3%, year-on-year + 2.7pct/ month-on-year ratio-0.2pct; net profit rate is 8.3%, year-on-year + 2.7pct/ link + 1.5pct. 23Q2 generated 15 million income from the disposal of fixed assets and right-to-use assets; after the restoration, the company's 23Q2 achieved a net profit of 50 million yuan, + 16.8% compared with the same period last year, with a net interest rate of 6.4%, year-on-year + 0.8pct/-0.4pct. We judge that the substantial increase in profit margins is mainly due to the effectiveness of the company's cost-cutting and efficiency measures and the volume of new products with high profit margins. With the gradual improvement of the scale effect of the company's new energy business, the company's profitability is expected to continue to rise.

Expense side: the company's 2023H1 sales, management, R & D and financial expense rates are 0.7%, 4.2%, 4.8% and 0.3%, respectively, compared with the same period last year-0.2pct, + 0.8pct, + 0.8pct,-0.7pct Among them, the rates of 23Q2 sales, management, R & D and financial expenses are 0.8%, 5.0%, 5.1% and-1.1% respectively, compared with the same period last year-0.3pct, + 1.8pct, + 1.2pct,-1.3pct respectively. The increase in the rate of management expenses is mainly due to the increase in expenses related to the listing of the company, while the decline in the rate of financial expenses is mainly due to exchange gains (13 million yuan in 23H1, + 45.1% compared with the same period last year). The increase in the rate of R & D expenses is mainly due to the company's continued efforts to increase the research and development of new products and technologies.

Communication business maintains stability and automobile business grows sharply.

2023H1's communications business segment achieved revenue of 840 million yuan, + 3.4% year-on-year, maintaining steady growth; gross profit margin 20.2%, year-on-year + 0.9pct.

2023H1's auto business segment achieved revenue of 750 million yuan, + 26.4% year-on-year; gross profit margin of 14.4%, year-on-year + 3.4pct.

According to the company's semi-annual report and Yunhai Metal announcement, during the reporting period, the company actively opened up new customers, successively entered the supply chain of mainframe factories such as Rivian, NIO Inc., XPeng Inc., Zhiji Automobile, and successfully developed domestic new energy-powered automobile battery customers in the first half of this year. In the field of magnesium alloy die casting, the company has successfully trial-produced two kinds of super-large new energy vehicle structures, namely, integrated body castings and battery box cover, which are cooperated with Yunhai Metal and the National magnesium Center of Chongqing University. It is expected to form a good application prospect in the field of lightweight parts.

Construction of Maanshan plant is under way to build a new factory in Mexico

According to the company's investor activity record table and semi-annual performance announcement on June 28 and July 21, the company is building its fourth production base-Maanshan production base. It is mainly responsible for the production and manufacture of aluminum alloy precision die castings for the three electricity system of new energy vehicles, as well as large, super-large integrated structures and emerging business units, mainly serving customers in East China. The Maanshan production base has a total of 350mu, with a construction scale of about 280000 square meters, of which the first phase is under construction and is expected to be completed in the first half of 2024 and put into production in the second half of the year. On June 7, the company announced that it plans to set up a subsidiary of Morrison in North America and Mexico, and plans to build factories in the United States and Mexico. According to the announcement of the investor relations activity record form of the company on July 21, the project has been approved by the Chongqing Development and Reform Commission, the overseas project team has been set up, and the relevant talents have been put in place. The establishment of factories at home and abroad is expected to help the company to further expand customers and markets, giving the company revenue imagination space.

Investment suggestion

The company ploughs precision aluminum alloy die castings, the performance growth is driven by the dual main industries of automobile and communication, and the customer structure is of high quality. The automotive field binds new energy leaders such as BYD and Tesla, Inc., and continues to expand new customers; in the field of communications, it cooperates deeply with Ericsson and Huawei.

The company's Maanshan factory and fund-raising project are progressing smoothly, and the construction of overseas factories gives performance growth room for imagination. Taking into account factors such as the expected intensification of competition among downstream car companies, we adjust our profit forecast. It is estimated that in 2023-2025, the company's revenue will be adjusted from 40.5 to 4.83 billion yuan to 37.1 billion to 454 million, and the net profit to its mother will be adjusted from 2.9 to 2.6 million, and from 1.37 to 1.83 to 1.24, 1.72 and 2.31, respectively. According to the closing price of 33.56 yuan on August 21, the corresponding PE is 27.1, 19.5, and 14.5 times, respectively, maintaining the "buy" rating.

Risk hint

The recovery of the automobile market is not as expected, the penetration of new energy vehicles is not as expected, the construction of 5G base stations is not as expected, the expansion of new customers is not as expected, the progress of capacity construction is not as expected, the risk of intensified competition in the industry, and so on.