Event: the company released a report for the third quarter of 2023 that the company's operating income in the first three quarters of 2023 reached 3.643 billion yuan, an increase of 1.57% over the same period last year; the net profit of returning to its mother reached 278 million yuan, an increase of 26.22% over the same period last year; and the net profit deducted from non-return reached 245 million yuan, down 0.11% from the same period last year. From a quarterly point of view, 2023Q3 achieved an operating income of 1.188 billion yuan, an increase of 4.06% over the same period last year, a net profit of 113 million yuan, an increase of 76.52% over the same period last year, and a net profit of 80.2481 million yuan, down 5.95% from the same period last year.

The vehicle business has developed steadily and the production capacity has been expanded in an orderly manner. The company's fixed-point projects involve Porsche, Audi, Volkswagen, Nissan, Dafa Toyota, Guangzhou Automobile, ideal and Geely and many other host brands, totaling more than 4 billion yuan, while adding nearly 400 million yuan of Wanxiang A123 BMS fixed-point projects for vehicle controllers, the vehicle business has developed steadily and the production capacity has continued to invest. The official website shows that the company plans to invest about 50 million yuan to expand the vehicle ECU manufacturing unit project, and expects to add 4 SMT lines and 5 assembly lines, covering an area of nearly 2000 square meters, equipped with MES management system, effectively enhance the digital and intelligent application of equipment, meet the growing production demand, and focus on the research and production of intelligent vehicle controller products.

Gross profit margin picked up faster and profitability continued to improve. The company actively develops LED downstream landscape lighting, Shang Chao lighting and other new application scenes, and expands the "vehicle controller + vehicle lighting" business, giving more added value to the products, while benefiting from favorable factors such as the drop in raw material prices, profitability is significantly improved.

In the first three quarters of 2023, the company's sales gross profit margin reached 18.12%, year-on-year increase in 2.73pct, net profit margin 7.68%, year-on-year increase of 1.37pct; Q3 single-quarter gross profit margin of 18.51%, year-on-year increase of 3.91pct, net profit rate of 9.62%, year-on-year increase of 4.02pct. In terms of expense rate, the company's sales / management / R & D / financial expense rate in the first three quarters of 2023 was 3.46%, 3.54%, 3.28%, 0.95%, respectively, slightly higher than the same period last year, and the overall performance of the fee side was robust.

Layout of automotive electronics to supplement the staying power of development. Recently, Debang Industrial Investment, co-sponsored by the company and Hengdian Capital, has invested exclusively in Kong Xiang Automotive Technology, a manufacturer of electronic rearview mirrors (CMS). At present, Kong Xiang Technology's CMS product based on self-developed ISP algorithm has been verified on board. The delay of this product system is much lower than the requirements of laws and regulations, and it can meet customers' customized needs for picture quality and intelligent functions. In the second quarter, it has been a fixed-point mass production project of a mainstream car factory, and the first product will be mass produced in the second quarter of 2024. The company actively promotes the layout and application of cutting-edge technology products in the field of automotive electronics, and complements the staying power of business development in multiple dimensions.

Investment suggestion: the company actively promotes the development of vehicle business, continuously improves its R & D capability and technical level, promotes product innovation and industrial technology upgrading, and strives to create new growth points. We estimate that the company's homing net profit from 2023 to 2025 is RMB 375 million, RMB 465 million, and EPS is RMB 0.79, 0.97 and 1.16, respectively, corresponding to PE, which is times that of 17-14-11, maintaining the "recommended" rating.