Introduction to this report:

Affected by untimely transmission of downstream recovery, the company's 23H1 performance fell short of expectations, but with the recovery of the rail transit industry and the rapid development of the new energy sector, the company is expected to regain a high pace of growth.

Key points of investment:

Maintain ratings to increase holdings. Affected by downstream rail transit and sluggish industrial demand, we lowered our 2023-2024 EPS forecast to 0.42 (-0.16) /0.58 (-0.16) yuan, and added the 2025 EPS forecast to 0.76 yuan. Referring to the average valuation level of the industry, we gave the company 30x PE in 2024, lowered the target price to 17.4 (-5.8) yuan, and increased our rating.

The performance fell slightly short of expectations, the performance of the rail transit and industrial sectors was under pressure, and the new energy business was growing rapidly.

23H1 achieved operating income of 680 million yuan, the same as the previous year, with net profit of 69 million yuan, or -15.27% of the same period; 23Q2 achieved operating income of 360 million yuan, -4.95% of the same period, and net profit of 34 million yuan, or -21.04% of the same period. The decline in profit in the first half of the year was mainly due to a decline in revenue from the rail transit non-connector category. By sector, the company's 23H1 rail transit and industrial sector revenue were -11.45%; the vehicle and energy information sector revenue was +11.53%, of which the NEV charging business revenue was +15.77%. As the rail transit industry picked up in the second half of the year, the company's performance is expected to improve significantly.

The leading rail transit segment has benefited from the recovery of the industry, and the growth and expansion of the new energy sector has accelerated. The rail transit sector is the company's basic market. The company is the leading rail transit connector in China, and the rail transit non-connector business is also rapidly penetrating. As the overall recovery of the rail transit industry in the second half of the year is transmitted to the parts side and forward orders are gradually released, the company's rail transit revenue is expected to increase significantly. In terms of new energy, the company's products such as high-voltage connectors and AC/DC charging guns have already entered the supply chains of many domestic first-line manufacturers, and is actively expanding overseas markets, which will greatly benefit from further expansion of new energy vehicles and infrastructure.

catalyst. The penetration of new energy vehicles has accelerated, and the construction of charging piles has exceeded expectations.

Risk warning. The recovery of the rail transit industry fell short of expectations; market competition intensified.