1H23 performance slightly exceeded our expectations
The company announced 1H23 results: 1H23 achieved revenue of 40 million yuan, +23.6% year on year, net profit of 91 million yuan, +37.0% year on year, minus non-net profit of 84 million yuan, +48.7% year on year. 2Q23 revenue was 210 million yuan, year over year/month over year, +35.5%/+17.1%; net profit due to mother was 51 million yuan, year over year, +44.8%/+23.7%; after deducting non-net profit of 47 million yuan, +67.6%/+26.0% year on year. The performance slightly exceeded our expectations, due to high growth in the motor business and increased profitability.
Development trends
The NEV business is growing rapidly, and profitability continues to increase. During the reporting period, the gross margins of the company's cleaning pumps, cleaning systems, and automobile motors reached 37%, 30%, and 36% respectively, which continued to increase year-on-year. The company continues to explore the application of fluid technology and motor technology in new energy vehicles. 1H23's revenue from the NEV sector was 115 million yuan, accounting for 29.2% of revenue, an increase of 48.8% over the previous year. We believe that with the electrification of new energy vehicles, the company is expected to gain long-term development driving force with a rich product matrix and continuous scenario expansion such as micromotors, ADAS cleaning systems, and harmonic magnetic field motors.
The cleaning system business is growing steadily, and thermal management and ADAS cleaning may contribute a major increase. The 1H23 cleaning pump and cleaning system business achieved total revenue of 210 million yuan, an increase of 18.4% over the previous year. The company is forward-looking and has deployed ADAS cleaning systems. Product intelligence and value have been greatly improved. Product road tests have already been carried out, and the company expects to obtain a target by the end of the year. Relying on the cleaning system business layout, the company's product development layout for “electronic circulation pumps, valves, and manifolds” in the field of thermal management systems is beginning to bear fruit. Among them, the cooling manifold product business is growing rapidly. 1H23 achieved revenue of 0.3 billion yuan, an increase of 40% over the previous year. We believe that with the accelerated implementation of advanced autonomous driving and the continuous iteration of thermal management systems, the company's ADAS cleaning and thermal management system may become the second growth curve for the cleaning system business.
The automotive motor business continues to develop rapidly, and harmonic magnetic field motors, etc. continue to expand. The company's motor business mainly includes single products such as trunks, side doors, and ABS motors, as well as module products such as invisible door handles and charging doors. 1H23's motor business achieved revenue of 150 million yuan, an increase of 32% over the previous year. At the same time, the company has made technological breakthroughs in harmonic magnetic field motor technology and new magnetic material technology. Currently, harmonic magnetic field motors are rapidly expanding from logistics rollers to new scenarios such as automobiles. We believe that the company has developed a good reputation based on motors as the cornerstone product. On the one hand, it has gone from a single motor to integrated and systematic product support, and on the other hand, it is accelerating the development of new high-barrier products, which is expected to shape a deeper barrier advantage.
Profit forecasting and valuation
Considering the increase in profits in the motor and cleaning business, we raised our 2023/2024 profit forecast by 10%/11% to 21,280 million yuan. The current stock price corresponds to a price-earnings ratio of 30.4 times/22.9 times in 23/24. Maintaining the outperforming industry rating, taking into account the high growth in the motor business and valuation increases, the target price was raised by 20% to 86.00 yuan, corresponding to the price-earnings ratio of 32.7/24.7 times in 23/24. There is room for an increase of 8% from the current stock price.
risks
Raw material prices fluctuate, new business development did not meet expectations, customer concentration, etc.