Overview of events:
On August 30, Hongquan Union of things released its 2023 semi-annual report. In the first half of 2023, the company realized operating income of 171 million yuan, an increase of 42.78% over the same period last year, and realized net profit of-23.7612 million yuan, deducting non-return net profit of-25.3441 million yuan.
Significant recovery on the revenue side, which is expected to continue throughout the year
On the revenue side, the company achieved revenue of 171 million yuan in the first half of the year, an increase of 42.78% over the same period last year; Q2 alone achieved operating income of 85.83 million yuan, an increase of 69.65% over the same period last year, showing a significant recovery trend, mainly because the company's revenue was highly related to the production and sales of commercial vehicles represented by heavy trucks. According to the statistics of the China Automobile Association, the sales volume of 2023H1 heavy trucks was about 476000, an increase of about 25.9% over the same period last year. We expect that as the production and sales of commercial vehicles represented by heavy trucks gradually pick up, and new products such as new GB driving recorders, T-Box, body controllers and other new products gradually enter the stage of mass production, the company's revenue side is expected to continue to repair. On the profit side, due to the continuous investment in R & D expenses and share payments for the development of new business, the company did not make a profit in the first half of the year, with a net profit of-23.76 million yuan, but the loss narrowed compared with the same period last year.
The passenger car controller starts the batch sale, the equity incentive demonstrates the company's confidence 2023H1, the company research and development expense is 60.76 million yuan, the research and development expense rate is 35.56%, we believe that the company's high-intensity R & D investment is mainly used for the horizontal expansion of the product line. 1) Automotive instrumentation, relying on the development experience of the on-board central control screen, has entered the automotive instrumentation field, and it is expected that there will be a small batch supply in the second half of the year. 2) Controller products, according to the report, the company's thermal management controller has started mass sales, and has a product layout in seat controller, refrigerator controller, air-conditioning controller and so on. We expect that with the continuous expansion of end customers and the improvement of demand for new products, the new business represented by controllers is expected to make great progress in 2023, and the second growth curve is gradually clear.
It is worth noting that the company issued an equity incentive plan in September 2022: 1) for the performance evaluation goal of the controller team (calculated in terms of file A), 2023 Universe 2024 Beijing Weibo (controller subsidiary) achieved revenue of 50 million pounds and 80 million yuan respectively. 2) for the assessment target of the remaining incentive object (calculated in terms of file A), the company's net profit deducted from non-return in 2023, 2024, 2025 is not less than 0.32, 0.60, respectively, 120 million yuan, which not only stabilizes the core team, but also shows the company's confidence in the growth of the following years.
Investment advice:
The company is a leading enterprise of domestic commercial vehicle intelligent network, with deep ploughing and preloading, rich product categories and high quality customer resources. At present, the commercial vehicle industry is gradually warming up, and the new business represented by the controller is also gradually developing, which can be expected in the future. We estimate that the company's 2023 Universe 2024 Universe 2025 will have revenue of 449 Universe 694 million and net profit of 0.33 Universe 0.89 million 140 million respectively, maintaining an overweight-An investment rating. Considering that the company is still in the period of performance repair in 2023, we give a 6-month target price of 26.8 yuan, corresponding to 30 times PE in 2024.
Risk tips: 1) the relevant industrial policies are not as expected; 2) the sales of commercial vehicles are not as expected; 3) the development of new technologies such as vehicle networking and commercial landing are not as expected; 4) the price of raw materials is out of stock.