Incident: The company released its 2023 interim report. 23H1 achieved revenue of 460 million yuan, +18.2% year on year; net profit of 61 million yuan, +22.5% year on year; gross profit margin of 25%, +1.4pp year on year, net interest rate 13.4%, +0.1 pp year on year. 23Q2 achieved revenue of 255 million yuan, +29.8% year on year, +24.1% month on month; net profit of 39 million yuan, +27% year on year, +72.6% month on month; gross profit margin of 26.4%, +1.7 pp year on year, +3.2 pp; net interest rate 15.3%, 0.3 pp year on year, +4.3 pp month on month.

All businesses are growing rapidly, and the share of new energy continues to rise: all businesses of 23H1 have achieved relatively rapid growth, compounded by falling raw material prices, and a recovery in profitability. Among them, fuel system hoses have revenue of 108 million yuan, +27.8%, gross profit margin of 28.6%, and +2.5 pp; cooling system hoses have revenue of 278 million yuan, +18.7%, gross profit margin of 22.6%, +2.9pp; accessory systems and brake hoses have revenue of 0.3 billion yuan, +15.8%, gross profit margin of 28.4.9%. 23H1's NEV ancillary products account for one-third of its main business, an increase of about 7pp over '22. New energy customers and product structures continue to transform.

Rich product categories and effective cost control: The company is a leading supplier in the domestic automotive hose industry. It has nine series of products, including automotive cooling system hose assemblies, multi-layer composite nylon hoses, and turbocharged pipeline assemblies. It has mastered core rubber formulation processes and self-production capacity for key components, and has obvious profitability advantages. As automakers apply the “packaged” supply model for the entire vehicle pipeline system, the company has shown a strong competitive advantage.

The company continues to promote refined production, technological innovation and transformation, and increase the proportion of localization of key components to carry out energy saving, consumption reduction, cost reduction and efficiency work. The cost rate during the 23H1 period was 9.6%, -0.2 pp over the previous year, maintaining a downward trend, and cost control results were remarkable.

Production capacity continues to expand, and new businesses are building new growth poles: the company is currently building a “incremental (manufacturing) expansion capacity expansion for traditional automobile and new energy vehicle parts” project with a design capacity of 2 billion yuan. By the end of 23Q1, the first phase had been completed and partially put into use. 23H1 had an output value of 84.29 million yuan. The second phase of the plant is under construction, and some of the plants will be put into use by the end of the 23rd. The company is gradually expanding cooling pipeline systems used in energy storage, big data supercomputing, etc., as well as pipeline systems in rail transit, oil and gas exploration, ships, etc., and has rich product categories. Products in the field of energy storage have established business negotiations or cooperative relationships with more than 40 customers, and have achieved batch supply. 23H1 products in the field of big data supercomputing have passed the No. 1 customer trial test, and are expected to be supplied in batches in the second half of the year. The new field is expected to become a new growth point for the company's performance in 24 years.

Profit forecasts and investment recommendations. It is estimated that the company's EPS for 23-25 will be 0.81/1.1/1.44 yuan, corresponding PE of 18/13/10 times, and return to parent net profit CAGR of 36.6%, maintaining the “buy” rating.

Risk warning: risk of fluctuations in raw material prices; risk of industry downturn; risk of increased market competition.