Key points of investment:

On August 30, Imbo released its semi-annual report for 2023. The company achieved operating income of 7.2 billion yuan, or -17.09% of the same period; realized net profit of 29.3008 million yuan, or -206.94% of the same period; net profit after deducting non-net profit of 41.7644 million yuan, -833.56% year-on-year.

Revenue and profit performance fell short of market expectations due to factors such as costs, transmission of raw material prices, and amortization.

The main factors affecting the company's performance during the reporting period include

Vehicle companies' aggressive promotion policies have caused demand to be wait-and-see, and sales have been under pressure for some periods of time. At the same time, competition in the automobile market is fierce, and non-leading NEV companies have not received sufficient growth, resulting in the company's shipments falling short of expectations. Additionally, some of the company's customers needed to digest inventory reserves in 2022, resulting in insufficient demand on the production side in the first half of 2023. As a result, operating income was lower than the data for the same period last year.

The profitability of most new energy automakers is under pressure, which transmits downstream to an increase in the annual decline in the supply chain. However, in the first half of 2023, the company's production costs were not fully transmitted to upstream suppliers. At the same time, in order to achieve the company's major customer strategy, according to market development needs and the company's strategic plan, the company continues to increase investment in R&D, equipment, and management. As a result, the company's net profit for the first half of 2023 was lower than the data for the same period last year.

Gross margin was under pressure, but cash flow improved markedly, and the company's strategy was adjusted into the deep water zone. Extensive management during the period of rapid growth faced challenges, and the company responded positively. In terms of cash flow, the assessment of repayment has positively matched the cash demand cycle for sales and purchases, which has clearly improved the current situation where the company's cash flow continues to be negative. The management side has also carried out full cost control. Q2 expenses (sales, management, R&D expenses rate) dropped by more than 9 pct month-on-month, and cost reduction and efficiency have gradually shown results.

Looking forward to the future, I believe that with the gradual release of third-generation integrated cores and the launch of new major customers, the company's revenue and profit will return to normal. In '24, it is expected that major customers will help the company's revenue impact 3 billion yuan after landing, and profit is expected to exceed 100 million yuan. However, not only have overseas customers contributed in '25, but new commercial vehicle products also have potential to expand, which is worth looking forward to.

Investment analysis: Reducing technology costs is a better solution for the Chinese manufacturing industry to overtake cars at corners, and Imboll's “integrated core” solution is a reflection of this trend. We expect that at a time when the industry is pressing for cost reduction, the company's products are expected to be quickly recognized by customers. However, taking into account factors such as improvements in raw material costs and fluctuations in the pace of demand fulfillment, revenue for 23-25 was lowered from 28.4/6.2 billion yuan to 18/29.4.2 billion yuan. Net profit for 23-25 years was reduced from 1.5/30/430 million yuan to 0.08/11/190 million yuan, corresponding to the current PE of 600/43/24 times. Considering the valuation premium that the company is expected to receive from its high growth rate next year, and the overall investment opportunities of the sector driven by a recovery in downstream demand, the company's buying rating was lowered to increase holdings.

Risk warning: The price war continues to worsen, raw material costs fluctuate, and downstream demand for new energy is shrinking. At the same time, the company received a letter of concern from the Shenzhen Stock Exchange on 7/28, stating that accounts receivable credit impairment losses were not accurately calculated in the first quarter report, and that errors were corrected in the relevant financial statements. Please pay attention to the risks.