3Q23 performance is in line with our expectations
The company announced 1-3Q23 results: 1-3Q operating income 4.409 billion yuan, year-on-year + 21.02%; return to the mother net profit 539 million yuan, year-on-year + 10.89% + 3Q23 income 1.529 billion yuan, year-on-year + 10.49%, month-on-month + 1.48%; return to the mother net profit of 200 million yuan, year-on-year + 13.81%, month-on-month + 8.34%. That's what we expected.
Trend of development
Overseas car sales declined month-on-month, while domestic passenger car business strengthened month-on-month. The company is the global leader in sunshades, and 3Q23 car sales in the United States and major Western European countries fell 3.0% and 6.1% month-on-month, respectively, according to Marklines data, dragging down the company's overseas sunscreen business. The domestic passenger car sales of 3Q23 are 10.1% to 6.75 million units compared with the previous month-on-month ratio of + 3.3%. The domestic passenger car industry is on the rise, which is driving the company's domestic revenue, partially offsetting the impact of weaker overseas growth on revenue. We believe that the recovery of the auto market is expected to lead to sustained and healthy growth in overseas sunshade business as auto companies reach a temporary agreement with UAW to end the strike and ease supply chain problems in the United States and major Western European countries.
Steady improvement of profitability, increase R & D investment in the layout of new ceiling products. 1-3Q23 gross profit margin is 27.96%, year-on-year + 0.79pptjue 3Q23 gross profit margin is 28.17%, year-on-year + 1.40ppt, month-on-month + 0.02ppt. Gross profit margin improves ceiling capacity utilization and promotes economies of scale. Due to the overall distribution of the company's business in China, the United States and Europe, although the appreciation of the US dollar in the third quarter brings certain exchange losses, the depreciation of the euro still contributes to the quarterly exchange gains. The company increased R & D investment, layout ceiling innovative products, 3Q23 R & D expenditure rate compared with the month-on-month ratio + 0.91ppt/+0.3ppt to 4.1% respectively. The 3Q23 management expense rate is the same as the month-on-month ratio-0.63ppt/-0.19ppt to 7.0%, which means that the company strengthens the cost control and the lean management is becoming more and more perfect. We believe that with the continuous expansion of the company's new ceiling capacity and the continuous promotion of cost reduction and efficiency, profitability is expected to be further enhanced.
Cost and customer demand drive to improve the global capacity layout and obtain overseas performance increments. The company issues convertible bonds, and the global ceiling capacity continues to expand. The company has production bases in the United States, Mexico, France and other places, driven by labor and land cost advantages, anchor the United States market to continue to layout Mexico. The company is the exclusive global supplier of sunshade panels for Tesla, Inc. 's whole range of products, and Tesla, Inc. 's sixth factory has landed in Mexico. We believe that after the Mexican base is completed and reached production, the company may obtain order increment under the catalysis of Tesla, Inc. 's industrial chain. Scale advantage to build a cost moat, overseas business is expected to further obtain growth space.
Profit forecast and valuation
The profit forecasts for 2023 and 2024 will remain basically unchanged. The current share price corresponds to a price-to-earnings ratio of 26.9 times 2024 / 21.8 times earnings for 2023 Universe. Maintain an outperform industry rating and a list price of 22.80 yuan, corresponding to 37.0 times 2023 price-to-earnings ratio and 29.9 times 2024 price-to-earnings ratio, which has 37.4% upward space compared with the current stock price.
Risk
The expansion of new products is not as expected, and the capacity climbing is not as expected.