Event: according to the three-quarter report of 2023, 2023Q3 realized revenue / return net profit / deducted non-net profit of 11.17 billion yuan, with year-on-year changes of + 3.2%, 32.46% and 37.11%, respectively, for revenue / return net profit / deduction of non-net profit for the first three quarters of 23, which decreased by 12.14%, 37.81% and 42.32% respectively.

The pressure of the market environment still exists, and diversified development contributes to the company's revenue growth. 23Q3 achieved revenue of 1.12 billion yuan, an increase of 3.20%. We judge that as the inventory of Cricut is gradually cleared in the first half of the year, the engraving machine business may have a larger growth in the third quarter; e-cigarette business: we judge that as the whole PMI machine and core module business have other suppliers, it is unlikely that the company will switch to the company on a large scale in the middle of the year, so the revenue growth may be significantly lower than the same period last year. Automotive electronics: Q2/Q3 China's new energy vehicle sales of 215.93 / 2.5305 million, an increase of 60.84% over the same period last year. 28.67%, the industry growth rate temporarily slowed down in the third quarter, income growth may be under pressure.

Product structure adjustment gross profit margin temporarily under pressure, optimistic that the future e-cigarette business volume will lead to the improvement of profitability. The gross profit margin / net profit margin of 23Q3 decreased by 4.46/5.88pct to 28.74% 12.05% compared with the same period last year. We judge that the gross profit margin changes mainly due to the adjustment of product structure within the business. The 23Q3 sales / management / R & D / financial expense rate is 1.78%, 5.36%, 8.17%, 0.95%, and the year-on-year change is-0.03/+0.31/-1.10/+4.63pct. The increase in the financial expense rate is mainly due to the company's relatively sound financial arbitrage policy and a decrease in US dollar exposure compared with the same period last year. The net operating cash flow of 23Q3 is 34 million yuan, down 85.08% from the same period last year. We judge that it is mainly due to the temporary impact of customers' account period problems, and the downstream customers of the company are all large multinational corporations, so the risk of bad debts is limited.

Actively build a factory to grasp the development trend of automotive electronics and further improve the international layout. The company's Mexican smart base is located in Monterrey with good local infrastructure and proximity to Tesla, Inc. is conducive to the formation of an industrial park. At the same time, Mexico Smart Manufacturing Base is located in the North American Trade area. If 24Q2 PMI products enter the United States smoothly, the factory can effectively avoid the negative impact of Sino-US relations and effectively obtain customers' regional expansion and development dividends.

Investment suggestion: the company is deeply engaged in UDM intelligent manufacturing business, and its UDM2.0 customer base and product matrix reserve are further enriched. The company has obtained the "Tobacco Monopoly production Enterprise license", e-cigarette machine smooth mass production, with the gradual maturity of the company's supply chain system, the company is expected to deeply participate in customer new product development. Engraving machine product inventory consumption is coming to an end with the gradual recovery of consumption, revenue is expected to increase steadily. Automotive electronic products are growing rapidly, and we are optimistic about the development of new products such as intelligent cockpit and dimming glass controller. It is estimated that the company's 2023-2025 net profit will be 4.7 million yuan, corresponding to the PE of 30max 18max 12X, maintaining the "recommended" rating.

Risk Tip: downstream customer demand slows, e-cigarette business is not as expected.