1H23's performance met our expectations
The company announced 1H23 results: 1H23 revenue was 18.223 billion yuan, +17.3% year-on-year; net profit of 1,681 billion yuan, corresponding to profit per share of 0.94 yuan, or +14.8%; the company's 1H23 performance was basically in line with our expectations. 2Q23 achieved revenue of 9.07 billion yuan, +21% year on year, and net profit of 888 million yuan, +14.7% year on year.
The coal machine sector continues to grow rapidly. Revenue from the 1H23 coal machine sector was +19% to 9.39 billion yuan, mainly due to the good development trend of the coal industry and continuous growth of coal machine orders; 1H23's net profit was 1,706 billion yuan, up 31% year on year.
The overall business situation in the automobile zero sector is relatively good. 1H23's auto parts sector revenue was +15% year over year to 8.833 billion yuan. Specifically, 1H23 ASIMCO's revenue was +15% to 2,219 billion yuan, mainly due to the company's new energy business expansion, compounded by overseas business growth and a recovery in domestic commercial vehicle market demand; SEG's revenue was +15% to 6.626 billion yuan, mainly due to automobile market growth in India, China and other places. The net profit of the 1H23 auto parts sector was 102 million yuan, a year-on-year decrease of 53%. Among them, SEG's net profit loss for the current period was 74 million yuan, compounded by the auto zero sector, which obtained asset disposal income in the same period last year.
Development trends
The coal machine business continues to be booming, and the automobile zero business is undergoing rapid transformation. 1) The coal supply level reached a record high in the first half of 2023, but short-term coal market prices are under pressure. We believe that in the long term, with the recovery of domestic and foreign macroeconomics, the tightening form of coal supply may continue, and the coal price center is expected to remain high; the company's coal machine sector orders and repayments increased 45% and 33% year-on-year respectively in the first half of the year. We are optimistic that the company's coal machine business orders will continue to grow in 2023. 2) The company's auto zero sector has accelerated business transformation and expanded the development of the NEV auto zero business. Among them, ASIMCO has made major breakthroughs in shock-absorbing and sealing businesses in the NEV market, Songe high voltage relay products have received orders from global auto parts groups and achieved mass production, significant progress has been made in R&D of new energy high voltage drive systems, technical exchanges and business negotiations with many potential customers. We are optimistic about the continued development of the company's auto zero business in the field of new energy.
Profit forecasting and valuation
Keep the 2023 and 2024 earnings forecasts unchanged. The current price of A shares and H shares corresponds to a price-earnings ratio of 6.6x/5.5x and 3.4x/2.7x for 23/24, respectively. Considering that there is still great uncertainty about the future development of the auto zero business, A-shares continue to outperform industry ratings. We lowered our target price by 24.6% to 14.68 yuan, corresponding to a price-earnings ratio of 8.6x/7.1x in 23/24, which has room for an increase of 30.0% from the current stock price. H shares maintained an outperforming industry rating. We lowered our target price by 22% to HK$8.45, corresponding to a price-earnings ratio of 4.4x/3.5x for 23/24, which is 30.0% upward from the current stock price.
risks
Intelligent capital expenditure by coal companies fell short of expectations; the increase in raw material prices exceeded expectations.