Event Overview: On August 25, 2023, the company released its 23-year semi-annual report. The company achieved operating income of 888 million yuan, an increase of 4.19% over the previous year; realized net profit of 82.9019 million yuan, an increase of 56.22% over the previous year.

23H1's performance was in line with expectations, and profitability was restored at an accelerated pace. In Q2 2023, the company achieved revenue of 493 million yuan, +20.85%/+21.73% over the same period; achieved net profit of 478.8874 million yuan, +23.7%/+36.76% over the same period, and achieved a year-on-month increase in performance. Among them: 1. Revenue side: 23H1 The company's vehicle side load decoration system/ vehicle front and rear protection system/ vehicle intelligent cockpit control system/ roof loading system achieved revenue of 2.34/218/1.49/113 million yuan respectively, compared to -7.59%/-13.62%/+25.46%/+19.63%. The main reason was the decline in revenue of side load decoration systems/vehicle front and rear protection systems. The main reason was high inflation and weak terminal consumer inventory in North America, Australia and other regions, but as the pace of interest rate hikes in North America and other major markets slowed down. The volume dropped sharply, Overseas business is showing a gradual recovery trend. The volume of smart cockpit business is mainly due to the fact that pre-orders have now entered the mass production and delivery period. The high growth in roof loading systems is mainly due to the mass production and delivery of multiple projects by Vijay Motor, and is also due to the increase in sales volume of core target models from major customers such as Great Wall, GAC Aian, and Changan. 23H1 Vijay Auto achieved revenue of 284 million yuan, an increase of 34.83% over the previous year.

2. Profitability: 23H1's gross profit/ net margin was 30.96%/9.23%, year-on-year, +7.98 Pcts/+3.07Pcts. Among them, the gross margin for side loading/front and rear protection/smart cockpit/roof loading was 32.54%/33.95%/34.44%/21.95%, respectively, +14.33%/+13.5%/-3.27%/6.12%. The increase in vehicle side loading/front and rear protection gross margin was mainly due to lower shipping costs and raw material prices. . 3. Expenses for the period: 23H1 The company's four-fee rate was 19.4%, +4.54 Pcts year on year. Among them, the sales/management/R&D/finance cost rate was -0.63 Pcts/+0.58 Pcts/+0.71 Pcts/+3.88 Pcts, respectively. The change in the financial expense rate was mainly due to exchange rate changes; the company increased R&D investment to help accelerate the implementation of the smart cockpit strategy.

The intelligent cockpit was implemented at an accelerated pace, helping the company achieve the medium- to long-term development strategy of “two wings in one”. The modification market has a global layout, simultaneous domestic and overseas efforts, and a stable company base. 1) Overseas aftermarket: The company continues to explore new markets and customers, and vigorously develop independent channels. Countries and regions such as North America, the Middle East, and Western Europe have achieved remarkable results. At the same time, the company is vigorously promoting the expansion of overseas electric smart categories. Categories such as electric pedals, rear pedals and drawer systems for pickup trucks, general side tents for vehicles, electric winches, and portable energy storage are progressing smoothly. New products are about to enter the release period, increasing overseas revenue.

2) Domestic aftermarket: Stabilize the scale of traditional business channels, make every effort to expand new channels, and increase revenue steadily. The implementation of smart cockpits has accelerated, Vijay Auto strategically and collaborated to lay out automotive exteriors, and the front-end market has enhanced its performance. 1) The field of smart cockpits:

23H1 added 5 new designated projects, including 2 electric side door projects and 3 electric tailgate projects. Products such as electric side doors, electric tailgates, electric pedals, and electric scissor doors have now entered many OEMs such as GAC Aian, Krypton, Changan, BYD, SAIC Motor, and Lotus. With the implementation of the project, the smart cockpit business is expected to contribute to core performance flexibility. 2) In the field of exterior decoration: Vijay Auto's core products cover luggage racks, pedals, spare tire covers, roll racks, front/rear guards, exhaust tailcovers, rear wings, etc. Downstream customers include Great Wall, GAC Aian, Changan, BYD, SAIC GM, Nissan, Chery, NIO, and Xiaopeng Motor. 23H1 continues to add 16 new winning projects. Of these, 14 projects have been set up. As the projects gradually enter mass production, it has helped the performance to continue to grow.

Investment suggestions: We expect the company to achieve net profit of 174/2.53/362 million yuan from 2023-2025. The current market value corresponding to PE in 2023-2025 is 28/19/14 times. The company is a leading domestic investor in the automotive aftermarket modification industry. It accelerates the release of smart cockpit products and maintains a “recommended” rating.

Risk warning: New energy sales fell short of expectations; the rise in raw material costs exceeded expectations, leading to low company gross margin expectations.