The performance is in line with expectations. The company's operating income in the first three quarters was 121.559 billion yuan, up 7.3% from the same period last year; the net profit from home was 4.74 billion yuan, down 2.8% from the same period last year; and the net profit from non-return was 4.142 billion yuan, down 2.9% from the same period last year. The operating income in the third quarter was 44.589 billion yuan, up 0.1% from the same period last year, up 11.0% from the same period last year; the net profit from the home was 1.9 billion yuan, down 19.5% from the same period last year, up 35.0% from the previous year; and deducting the non-return net profit from 1.751 billion yuan, down 22.3% from the same period last year and up 44.3% from the previous year. In the first three quarters, the company actively responded to the challenges of unfavorable factors such as intensified competition in the industry, adjustment of customer and product structure, and automobile price war, looking for incremental opportunities to achieve steady growth in business performance.
The gross profit margin was slightly under pressure in the third quarter, and the expense rate improved. The gross profit margin in the first three quarters was 12.8%, down 0.9 percentage points from the same period last year; the gross profit margin in the third quarter was 12.3%, down 1.7 percentage points from the same period last year, and 0.2 percentage points lower than the previous quarter, which is expected to be mainly due to the impact of price reduction pressure on downstream customers. During the third quarter, the expense rate was 8.7%, down 0.5 percentage points from the same period last year and 1.5 percentage points from the previous year. Among them, the management expense rate decreased by 0.2 percentage points from the same period last year, and 1.3 percentage points from the previous year, which is expected to be mainly due to the implementation of measures to increase efficiency and control fees. The net cash flow of operating activities in the first three quarters was 7.248 billion yuan, down 10.3% from the same period last year, mainly due to the increase in cash paid for the purchase of goods and services.
Optimize customer structure and promote overseas business development. The company continues to promote the optimization of customer structure, supplying new forces, such as Tesla, Inc. China, BYD, NIO Inc., XPeng Inc., Great Wall, Geely, Chery, Guangzhou Automobile, Mercedes-Benz, BMW, etc., independent brands and luxury brand models. Tesla, Inc., BYD and other new energy customers continue to increase their proportion of revenue, and reduce their dependence on the upper automobile system. The company sets up a global automotive interior business platform, with the help of the resource advantages and synergy of the platform, to promote other core businesses such as passive safety and seats to go out to sea, establish cooperation with Tesla, Inc., Volkswagen, Audi, BMW, Mercedes-Benz and other global customers and realize the localization of global platform projects. It is expected that new forces, independent brands, luxury brand customer development and overseas business expansion will provide a strong increment for the company's sustainable development.
The development of intelligent and electrified services has been accelerated. Huayu Automotive Electronics Branch's short-range, medium-range and long-range millimeter wave radar support customer models such as NIO Inc., SAIC passenger car, SAIC Chase, Chery, SAIC GM Wuling, etc. Huayu Magna speeds up the development of Great Wall Motor's medium-and high-power platform on the basis of mass production of Volkswagen and GM global electric vehicle platform assembly projects. The drive motor products of Huayu Automobile Electric Co., Ltd. are general global electric vehicle platform BEV3 and some models of SAIC passenger cars. 800V high voltage drive motor products have entered the stage of mass production. The new cockpit technology products of Yanfeng Automobile Decoration Company have been designated by customers such as SAIC General Motors, Chery, Selis and so on. It is expected that intelligent and electric business will become a new growth point of the company, which will help the company to continue to optimize its product structure.
By adjusting the gross profit margin and expense rate, it is predicted that the EPS from 2023 to 2025 will be 2.16,2.47,2.70 yuan respectively (the original 2.30,2.58,2.79 yuan). With reference to the comparable company valuation, we will maintain the 2023 PE valuation of 13 times, the target price of 28.08 yuan, and maintain the buying rating.
Risk hint
The lower-than-expected demand of the passenger car industry affects the profit, and the price reduction of the main supporting vehicles affects the profit.