1H23's performance met our expectations
The company announced 1H23 results: 1H23 revenue of 2,879 million yuan, +27.47%; net profit of 339 million yuan, +9.24% year on year; 2Q23 revenue of 1,507 million yuan, +32.82%, month on month, +9.84% month on month; net profit of 185 million yuan, +10.84%, year on month, +20.24%. The 1H23 results were in line with our expectations.
Development trends
The sun visor is developing steadily, and the horizontal expansion of the roof assembly has achieved a high increase in the value of bicycles. 2Q23 The company's revenue hit a quarterly high, and the sun visor, headrest, and ceiling business grew rapidly. According to the company's sun visor sales estimates, the current global market share of the company's sun visors has exceeded 45%, and the global layout of core products is leading. The roof system integration product further integrates parts such as sun visors, handles, and control devices, etc., enabling the company to shift from supplying individual parts to supplying assembly parts. The estimated value of bicycles has also increased from 700 yuan to 4,000 yuan. We expect the company's revenue to reach another level as roof projects for customers such as Rivian, Tesla, and GM are put into operation one after another.
Profitability continues to recover, and forward foreign exchange losses affect net profit performance. 1H23 gross margin was 27.85%, +0.43 ppt,2q23 gross margin was 28.15%, +1.16 ppt year on year, +0.63 ppt. The improvement in gross margin was mainly driven by multiple factors such as scale effects, the depreciation of the RMB, and the reduction in the price of raw materials for plastic particles.
From the cost side, the cost rate for the 2Q23 period was -5.51ppt to 9.25%, of which the financial expense rate was -7.31ppt to -4.49% month-on-month. The company initiated forward foreign exchange contracts to avoid exchange rate fluctuations, resulting in a loss of 58.496 million yuan, which was compounded by an exchange gain of 455.34 billion yuan. Actual exchange rate changes had little impact, and business performance improved steadily. 2Q23 net profit after deducting non-attributable income reached 230 million yuan, achieving a high increase of +44.4%/66.9% over the same period, a record high for the quarter. We believe that with the strengthening of cost control capabilities and the expansion of high-value business, the company's profit growth elasticity is expected to further increase.
Global layout optimization combined with the implementation of ceiling production capacity opens up room for growth. The company issued a convertible bond raising announcement in August. It plans to invest 325 million yuan to build a ceiling product project with an annual production capacity of 700,000 sets; it will invest 823 million yuan to build a Mexican interior parts industry base, including 300,000 sets of integrated ceiling system products and 600,000 sets of ceiling products with an annual production capacity of 300,000 sets. As the company's ceiling products penetrate into the North American customer supply system, the number of targeted projects is expected to usher in a period of rapid growth. We are optimistic that in the current context of domestic parts going overseas, the company has a leading global layout advantage. As new overseas production capacity is gradually put into production and the product structure is upgraded, a new growth curve is expected to be achieved.
Profit forecasting and valuation
Keep the 2023 and 2024 earnings forecasts unchanged. The current stock price corresponds to the price-earnings ratio of 30.9 times/25.1 times of 2023/2024. Maintaining an outperforming industry rating, considering the company's product structure upgrade, we raised our target price by 9.1% to 22.80 yuan, corresponding to 36.9 times the 2023 price-earnings ratio and 29.9 times the 2024 price-earnings ratio, which has 19.3% room for improvement from the current stock price.
risks
Overseas expansion fell short of expectations, and profitability declined.