The company's 23Q3 revenue and net profit hit record highs in a single quarter, and profitability benefited from a steady increase in economies of scale. The greatest impact of industry depots has passed, and Q4 is expected to usher in the traditional peak season. Battery tray products are delivered with basic repairs and are expected to benefit from upside sales of key models such as Qinjie, while the optical storage new ODM project is also gradually starting delivery. We expect the company's Q4 production to rise further from the previous month, while economies of scale are expected to continue to release, driving profitability to continue to improve. In view of the increasing competition in the new energy-related industry chain since the beginning of this year, and the phenomenon of destocking in some sectors such as lithium electricity and household storage, resulting in lower performance rates of some customers, we have adjusted the company's EPS forecast for 2023-2025 to 2.38 EPS 4.06 shock 5.86 yuan (the original forecast for 2023-2025 was 3.83 shock 5.78max 7.84 yuan). In view of the current entry into Q4, we believe that there is a basis for switching the valuation of the company based on 2024 performance expectations. Taking into account the valuation level of the comparable company (comparable companies Top Group, Wencan shares and Ming Lida Wind unanimously expected an average PE of about 21x in 2024), we give the company a target PE of 19x in 2024 based on prudent principles, maintaining the target price of $78 and maintaining the buy rating.
The results were in line with expectations, with single-quarter revenue and net profit reaching record highs. On October 26, the company released its results for the third quarter of 2023: revenue in the first three quarters of 2023 was 3.906 billion yuan (year-on-year + 32.05%) and net profit was 278 million yuan (year-on-year + 66.46%). Among them, Q3 achieved revenue of 1.455 billion yuan (+ 16.55% compared with the same period last year) and net profit of 110 million yuan (+ 20.26% compared with the same period last year), which fell within the range of previous performance forecasts (1.03-113 million yuan), in line with market expectations. Q3 revenue month-on-month increment is expected to come mainly from battery trays and car body structure products, while H customer savings project is still in the recovery stage. In terms of profitability, Q3's single-quarter gross profit margin and net profit margin reached 18.53% and 7.56% respectively, reflecting the gradual release of the company's scale effect. Looking forward to the follow-up, the company has abundant orders on hand, and the new fixed point gradually entered the delivery phase last year and the beginning of the year. At the same time, Q4 itself is also a traditional peak season in the automotive industry, and H customers light storage ODM new projects are expected to start delivery in Q4, and Q4 is expected to continue to rise month-on-month. With the further release of economies of scale, we expect the company's profitability to improve further on a Q3 basis.
The maximum impact of the removal of the industry has passed, and the Yibin factory is expected to benefit from the bright performance of the industry. The company's first-half performance was lower than expected, the main effects include: Q1 fuel vehicle price war and lithium de-inventory, Q2 overseas storage and inventory, corresponding to the impact of the company's battery tray part of the project and H customer household savings project. At present, the influencing factors have been gradually repaired: first, C customers delivered month-on-month gradual repair, has returned to the normal stage of 2022. Among them, Yibin factory, which has the greatest influence in the first half of the year (mainly supporting C customers, downstream fixed-point models including Qijie, Deep Blue, etc.), has recently benefited from the rising sales volume and the rapid upward growth rate. According to the official Wechat account of MJ AITO, the number of new M7 models has exceeded 60, 000 since its launch in September, making it an outstanding performance. The company is not only the core supplier of battery trays for M5, M7 and M9, but also indirectly supporting the M9 seat skeleton project. the current new M7 order is eye-catching, and M9 is expected to be released in November, which is expected to lead the company's Yibin factory to reverse the significantly lower-than-expected delivery volume in the first half of the year. Second, the household savings inventory has passed the most severe stage. The sharp rise in European energy prices last year led to a peak in household savings shipments.
The company is mainly for H customers light storage product line supporting household, industrial and commercial structural components, while undertaking industrial and commercial product ODM projects. Q2 is affected by the removal of storage, household supporting product delivery has declined significantly, Q3 has begun to repair gradually, and Q4 delivery is expected to continue to improve month-on-month.
Deeply bound to major customers, the supporting status of the industrial chain has been steadily improved. In terms of structural components of new energy vehicles, the company is deeply bound to major customers such as GAC Ean and BYD. In addition to the traditional body structure products, the company has set up a joint venture with Bentler to actively expand chassis components and other projects to enhance the value of bicycles. In addition, the company has set up subsidiaries and related production capacity in Mexico, and is gradually increasing capacity construction efforts to actively expand customers in North America. In terms of battery pallets, the company signed a strategic cooperation agreement with Ningde Times at the end of 2022, and it is expected that the delivery proportion of subsequent battery box projects (including pallets, upper covers and other structural components) is expected to increase, leading to an increase in the unit value of the products. In terms of optical storage structures, the company has made steady progress in cooperation with H customers, the products are based on inverter structures, while extending the layout of commercial inverter ODM cooperation. Commercial inverter ODM project has started delivery in 2023Q2, initially mainly for customer supply of materials, the follow-up is expected to gradually increase the proportion of self-supply, enhance the supporting value. In addition to H customers, the company is also actively expanding Sunshine Power supply, Jinlang Technology, SolarEdge and other head optical storage customers at home and abroad. At present, customer expansion, product proofing and quotation are making steady progress.
Risk factors: new energy vehicle market competition aggravates the risk, industry destocking is slower than expected, technological change risk, raw material cost upward risk, international geopolitical risk.
Investment advice: the company's 23Q3 single-quarter revenue and net profit hit an all-time high, and profitability benefits from economies of scale. The greatest impact of industry depots has passed, and Q4 is expected to usher in the traditional peak season.
Battery tray products are delivered with basic repairs and are expected to benefit from upside sales of key models such as Qinjie, while the optical storage new ODM project is also gradually starting delivery. We expect the company's Q4 production to rise further from the previous month, while economies of scale are expected to continue to release, driving profitability to continue to improve. In view of the increasing competition in the new energy-related industry chain since the beginning of this year, and the phenomenon of destocking in areas such as lithium electricity and household storage, which has led to lower performance rates of some customers, we have adjusted our company's EPS forecast for 2023-2025 to 2.38 EPS 4.06 shock 5.86 yuan (the original forecast for 2023-2025 was 3.83 shock 5.78x10 7.84 yuan). In view of the current entry into Q4, we believe that there is a basis for switching the valuation of the company based on 2024 performance expectations. Taking into account the valuation level of the comparable company (comparable companies Top Group, Wencan shares and Ming Lida Wind unanimously expected an average PE of about 21x in 2024), we give the company a target PE of 19x in 2024 based on prudent principles, maintaining the target price of $78 and maintaining the buy rating.