Semi-annual report 2023: the weak recovery of rail traffic demand leads to the performance pressure, and the new energy vehicle connector business continues to grow. 1) the rail transit recovery is weak, and the performance in the first half of 2023 is under pressure: the company achieved operating income of 680 million yuan in the first half of 2023, unchanged from the same period last year; realized return net profit of 70 million yuan, down 15% from the same period last year; realized non-return net profit of 60 million yuan, down 16% from the same period last year. 2) the revenue of vehicle and energy information business is nearly half, and the comprehensive gross profit margin is downward: in the first half of 2023, the company achieved a gross profit margin of 30%, a year-on-year change-1.4pct, mainly due to the adjustment of the company's business structure, and the increase in the proportion of new energy vehicle business (with low gross profit margin). The company achieved a net interest rate of 10%, a year-on-year change-2.4pct. The company's sales, management and financial expense rates are 7%, 6% and-2%, respectively, with year-on-year changes of + 1pct,-0.4pct,-0.6pct. 3) continuous increase in R & D investment: in the first half of 2023, the company's R & D expenditure increased by 16% compared with the same period last year, and the R & D expenditure rate was 8%. As of June 30, 2023, the company and its subsidiaries had a total of 608 patents, including 89 invention patents.

Rail transit plate: rail connector leader, non-connector products continue to expand in the first half of 2023, the company's rail transit and industrial sector achieved revenue of 310 million yuan, down 11% from the same period last year, mainly due to the decline in rail transit non-connector category income; the revenue decline scale effect weakened, and the gross profit margin fell slightly to 40.5%. According to the China Urban Rail Transit Association, the length of rail transit operation lines will be 1080.6 km in 2022, and 25 new rail transit lines will be added. Rail transit construction is in the ascendant and is expected to enter a high-quality development stage in the future. Incremental release + stock update, rail overhaul market space is large. The company has been in the rail transit market for many years, and many products have passed the CRCC certification. In 2022, the company actively promoted the research and development of Fuxing 350 intelligent EMU cross-connect connector project, and successfully entered the Fuxing 350 intelligent EMU supplier series.

New energy vehicles and charging areas: high-quality and stable customer resources, strong performance growth momentum 1) in the first half of 2023, the company's vehicle and energy information sector achieved revenue of 330 million yuan, an increase of 12% over the same period last year, with a gross profit margin of about 18.9%, a decline in 1pct. The main products of the company's new energy vehicle business are high voltage connectors, AC / DC charging guns and wire harnesses. It has entered the supply chain system of domestic first-tier brands and joint venture brands such as BYD, Huawei, Geely, Great Wall, Chery, Changan, SAIC, FAW, Guangzhou Automobile, BAIC and Honda.

2) according to the China charging Alliance, China's charging infrastructure will increase by 2.593 million units in 2022, with a pile-to-truck increment ratio of 1vv2.6. With the increase in the permeability of new energy vehicles, the construction of charging infrastructure will be accelerated. The company has invested in the "liquid-cooled high-power charging gun project", which is in a dominant position in the competition of high-power liquid-cooled supercharge gun and other products.

The company issued an equity incentive plan to demonstrate the confidence in the development of new energy vehicle business. On September 30, 2022, the company issued an equity incentive plan to its subsidiary Sichuan Yonggui (mainly responsible for new energy connector and communications connector business). Calculated on the basis of the restricted stock assessment target granted for the first time, Sichuan Yonggui's revenue target for the next three years will not be less than 100 million yuan in 8-12-17, demonstrating confidence in the performance development of new energy vehicles.

Profit forecast and valuation

Rail connector faucet, new energy vehicle connector opens the growth space. It is estimated that the company's net profit from 2023 to 2025 will reach 1.8,2.70 and 380 million yuan respectively, an increase of 18%, 49% and 39% over the same period last year, and the corresponding PE is 27, 18 and 13 times. Maintain a "buy" rating.

Risk tips: the demand for new energy vehicles is lower than expected; customer expansion is not as expected; industry competition aggravates the risk.