Events:

On August 18, the company released its half-yearly report on 2023, showing that in 2023, H1 achieved revenue of 1.567 billion yuan, year-on-year + 29.76%, net profit of 814 million yuan, + 62.14%, and non-return net profit of 77 million yuan, + 52.07% over the same period last year. In 2023, the operating income of Q2 was 828 million yuan, + 39.57% compared with the same period last year, and the net profit was 45 million yuan, + 101.31%, 47 million, + 79.89%, respectively.

Wide coverage of customers and steady increase in revenue

As a leading domestic automobile cable company, our products are in line with international, German, Japanese, American, Chinese and other professional automotive cable standards. Customers cover domestic and foreign leading automobile harness manufacturers such as Ambofo, Yazaki, Lear, Guhe, Fudi, etc., and end customers cover domestic and foreign leading automobile companies such as Volkswagen, BMW, Mercedes-Benz, Toyota, Guangzhou Automobile, Geely, Great Wall, Chery and so on. and in the new energy system into the supply chain of BYD, Tesla, Inc., Geely, NIO Inc., ideal, United Automobile and other leading manufacturers. Under the background of the current "volume" + "transformation" industry, it has a relatively stable driving force for income growth. In 2023, the revenue of H1 company's general line and new energy line increased by + 29.13% and 24.03% respectively, maintaining steady and rapid growth. The downward price of raw materials + the improvement of product structure, profitability continues to rise, benefiting from the decline in copper prices and the increase in new energy products with higher gross margins, the company's gross profit margin continues to improve.

The gross profit margin of 2023H1's general line and new energy line reached 11.35% and 18.79% respectively, an increase of 0.94% and 2.31% over the same period last year, driving the overall gross profit margin to 11.96%, 1 percentage point higher than that of the same period last year. In addition, driven by the reduction in interest after convertible debt into equity, the company's financial expense rate dropped significantly to 0.93%, driving the company's net interest rate to 5.19% in the first half of the year, and profitability continued to rise.

The introduction of equity incentives demonstrates the company's confidence and continues to improve efficiency. On August 17, the company issued the 2023 restricted Stock incentive Plan (draft). It plans to grant restricted stock incentives to 129 middle managers and core key employees at a price of 43.24 yuan per share, with the corresponding performance evaluation target of an annualized growth rate of 25% of the net interest rate in the next three years. Compared with the previous equity incentive, the incentive scope is expanded from senior executives to middle management and backbone employees, the incentive effect is more significant, and highlights the company's confidence in future growth.

Investment advice and profit Forecast

The company's income has increased steadily and rapidly, and the profit margin has improved. We estimate that the company's operating income in 2023-2025 will be 38.11,47.17, 5.623 billion yuan, respectively, and the net profit returned to the parent will be 2.24 yuan, 2.97 yuan, respectively. According to the latest equity estimates, the corresponding basic earnings per share will be 2.52 yuan, 3.35 yuan, 4.17 yuan, respectively. According to the latest stock price estimates, the corresponding PE23.68 will be 14.32 times. Maintain the "overweight" rating.

Risk hint

The risk that the development of the automobile industry is not as expected, the domestic substitution process of the cable industry is not as expected, the risk of fluctuation of raw material prices, and the impact risk of the company's large-scale sales restriction and lifting on August 24.