Main points of investment

2023H1's revenue and profits hit record highs

The total revenue of H1 in 2023 was 1.515 billion yuan, an increase of 15.8% over the same period last year, and the net profit was 264 million yuan, an increase of 53.1% over the same period last year. Both revenue and profits hit record highs. 2023H1 gross profit margin is 33.4%, an increase of 4% over the same period last year, and profitability continues to pick up.

The company's global layout has been further improved.

In terms of business region, the proportion of the company's overseas revenue has increased significantly from 52.6% in 2017 to 63.4% of H1 in 2023. Among them, the share of North American business increased from 25.9% to 48.3%, making it the largest overseas market. The company's Mexican plant made an important contribution to the rapid growth of orders in North America, accounting for a significant increase in revenue from 5.3% in 2021 to 13.3% of H1 in 2023. As of June 2023, T customers of the internationally renowned EV brand accounted for 46.9% of factory sales in Mexico.

Business upgrading improves product competitiveness and ASP. The average price of products sold by companies with sufficient orders on hand rose 15.5% from 6.78 yuan per H1 in 2022 to 7.83 yuan in 2023. The promotion of ASP is mainly due to the upgrading of old business and the expansion of new business. In the future, the company will continue to promote the strategy of developing more advanced assembly projects that involve more technology and more complex surface treatment processes than traditional electroplating processes.

As of June 30, 2023, the total amount of orders on hand will be about 11 billion yuan in the next 4.5 years.

According to the distribution of order delivery time, the company's revenue will most likely continue to grow in the next few years.

Maintain the buy rating with a target price of HK $3.67 per share

We forecast that the company's revenue in 2023-2025 will be 29.84 (+ 3.5%), 33.55 (12.4%) and 35.4 (+ 6) billion yuan respectively, and the corresponding net profit will be 5.33 (+ 23.6%), 5.71 (+ 7.1%) and 6.12 (+ 7.2%) billion RMB respectively. We believe that a 6 times PE based on the 2024 results is a reasonable valuation, with a target price of HK $3.67 per share, with 21.2% room to rise and maintain a "buy" rating.