Event: the company released its 2023 quarterly report that in the first three quarters of 2023, the company realized revenue of 3.28 billion yuan, year-on-year + 19.8%; net profit of 170 million yuan, + 24.7%; and non-return net profit of 170 million yuan, + 25.9% of the same period last year. 23Q3 gross profit margin 13.5%, year-on-year + 2.9pct; net margin 5.8%, year-on-year-0.4pct.

Comments:

23Q3's performance continued to grow positively from the previous month, and its profitability was repaired quarter by quarter. 23Q3 achieved revenue of 1.26 billion yuan in a single quarter, + 20.7% year-on-year, + 22.0% month-on-month, and realized net profit of 70 million yuan, + 12.9%, and + 34.6%, respectively. With the improvement of capacity utilization, the profitability of the company's automotive business continues to improve, leading to the upward repair of the overall sales gross profit margin. The single-quarter net sales margins of 23Q1, 23Q2 and 23Q3 are 3.9%, 5.3% and 5.8%, respectively. In terms of expense rate, 23Q3's sales / management / R & D / financial expense rate was 0.6%, 3.1%, 2.4% and-0.2% respectively, compared with the same period last year, + 0.1pct, + 0.9pct,-0.2pct, + 1.8pct, respectively, which remained basically stable.

The increase in the value of bicycles and the number of customers' new models are expected to lead to the rapid growth of the company's automobile business.

New energy vehicles have higher demand for motor efficiency and power under comprehensive operating conditions, the electric drive system shows an integrated trend, and the products supplied by the company are gradually expanded from the core to the electrically driven stator and rotor assembly, and the value is expected to be greatly increased. In the field of automotive business, the company has a high customer structure, including Geely, BYD, United Microelectronics Corp, Shanghai Electric Power Drive, East Wind Power Drive and other mainframe factories and Tier 1. At the same time, the company cooperates deeply with Huawei, supporting the stator and rotor assembly products of car companies such as Cyrus, Chery, Changan, Jianghuai and Huawei, with a bicycle value of 2000 yuan or more. We believe that with the release and volume of Huawei's new models, the company's new energy vehicle business is expected to have a strong resonance.

The traditional business is strong and resilient, and the new scenarios are in full bloom. The company's traditional business two-wheeler development is stable, has a high market share, Yadi, Emma, Lvyuan and other first-and second-tier customers have basically achieved coverage. In addition, the company accelerates the expansion of new application scenarios such as drones, and obtains the targeting of head customers such as DJI, which is expected to contribute to performance increment in the future. At the same time, the company actively ploughs new technologies and products in the field of new energy, continues to develop in the fields of precision parts of battery structure and hub motors, and is expected to achieve the landing of products one after another.

Earnings forecast and investment rating: we believe that the steady development of the company's traditional business and accelerated breakthroughs in new energy vehicles and new scene applications are expected to continue to provide strong support for performance growth. We estimate that the company's net profit from 2023 to 2025 is 2.5,3.5 and 490 million yuan, corresponding EPS is 0.6,0.9,1.2 yuan respectively, and corresponding PE is 26.6,19.2 and 13.6 times respectively.

Risk factors: raw material price fluctuation risk; customer and project expansion is not as expected; exchange rate fluctuation risk; new energy vehicle business is not as expected.