Performance review
1H23's performance met our expectations
The company announced 1H23 results: revenue of 2,562 million yuan, +17.3% year on year; net profit of 60 million yuan, +39.3% year on year; net profit after deducting non-return net profit of 81 million yuan, +48.7% year on year. The corresponding revenue for 2Q23 was 1,346 million yuan, +23.6% year on year, +10.8% month on month; net profit for return was 24 million yuan, +44.7% year on year, and -31.2% month on month. The 2Q23 results were in line with our expectations.
Development trends
The new energy business is growing rapidly, and the two lines of product+customer are simultaneously creating growth momentum. 1H23's new energy business revenue was 355 million yuan, +70.3% year-on-year. This is mainly due to the continuous improvement of the company's new energy charging and distribution product matrix and the beginning of mass production of multiple products. According to statistics from the Charging Alliance, domestic charging pile construction has accelerated markedly. The 1H23 vehicle pile incremental ratio is 2.6:1. The company is committed to creating charging and distribution products compatible with various regional standards. Currently, it has passed European standard certification, and the company expects to pass American standard certification in the second half of the year. The company's customer resources have successively covered OEMs such as Volkswagen, Audi, Geely, and Chery; related production capacity continues to climb to help increase orders. We believe that the gradual implementation of the company's new energy projects is expected to drive continued rapid revenue growth.
The profitability of the cockpit business has increased markedly, and the weighing equipment business is gradually picking up. The gross margin of the 1H23 cockpit/scale business was 23.7/ 30.8%, respectively, an increase of 2.7/3.2ppt over the previous year. The cockpit business has fully benefited from the high-end trend. The market share of luxury brands is gradually increasing, and the increase in the penetration rate of intelligent interior products is driving up the value of bicycles. The company continues to optimize the customer structure and product structure of the weighing equipment business, and its profitability is gradually improving. The company's interim report indicates that it has received orders for cockpit parts from leading overseas new energy customers. We believe that with the volume of orders on hand and the improvement of the macro environment, the revenue scale of the company's cockpit business is expected to continue to grow, and the scale business is expected to continue to recover.
The production capacity of convertible bond fund-raising capacity has increased, and the scale effect has gradually been unleashed. In August 2023, the company announced that it plans to issue no more than 700 million yuan of convertible bonds, of which 60 million yuan will be used to increase the production capacity of Mexican cockpit components, enhance the service capacity of North American customers, and lay the foundation for supporting customers to go overseas; raise 280 million yuan to increase the production capacity of cockpit components and new energy products in Ningbo and other places; and it plans to invest 150 million yuan in the second phase of the project to build charging networks in major cities in East China and South China. We believe that the company's new energy business is expected to benefit from the broad growth space of charging infrastructure, and that the increase in global production capacity is expected to help further enhance the company's profitability.
Profit forecasting and valuation
The profit forecast for 2023/2024 remains unchanged. The current stock price corresponds to the price-earnings ratio of 20.4 times /15.6 times the 2023/2024 price-earnings ratio. We maintain an outperforming industry rating and the target price of 37.49 yuan, corresponding to the price-earnings ratio of 25.0 times/19.1 times for 2023/2024, with 22.7% upside from the current stock price.
risks
Geopolitical risks, the risk of rising raw material prices, and the penetration of high-end models fell short of expectations.