This report is read as follows:

The company ploughs the precision parts industry, expands the spare parts business of new energy vehicles by virtue of strong technology accumulation, develops the second growth curve, has obvious advantages in technology and products, and is expected to quickly increase its market share.

Main points of investment:

Investment suggestion: the company opens the second growth curve for commutator leading enterprises to expand the business of new energy vehicle components, which has significant technical advantages and is expected to bring high performance. Maintain the EPS of 0.27,0.64 and 0.94 yuan from 2023 to 2025, maintain the target price of 17.06 yuan, and increase the holding.

The performance is in line with expectations. In the first three quarters of the announcement, the company achieved revenue of 2.237 billion yuan / + 13.35%, net profit of 43 million yuan / + 35.48%, and non-return net profit of 49 million yuan / + 616.14%. In the third quarter, the revenue was 805 million yuan / year-on-year + 14.79% / month-on-month + 6.17%, and the net profit returned to the mother was 37 million yuan / year-on-year + 435.89% / month-on-month + 556.01%.

Q3 profit margin rebounded, profit inflection point has been obvious. In the first three quarters, the gross profit margin was 13.92%/-1.07pct and the net profit rate was 1.91%/+0.31pct. The gross profit margin in the third quarter was + 0.01% compared with the previous quarter. The sales / management / R & D / financial expense rates for the first three quarters were 2.17%, 2.77%, 3.47%, 1.99%, respectively, compared with the same period last year-0.99/-1.78/+0.05/-0.52pct. We judge that the growth in performance is mainly due to:

1) the release of new products such as components of new energy vehicles is smooth, leading to the growth of revenue and gross profit margin; 2) the construction and relocation of factories have been completed, and the company has entered a period of orderly expansion.

The spare parts of new energy vehicles open the room for growth, and high-tech barriers help the company to increase its market share. The company has deep accumulation in ultra-precision metal and plastic molding, polymer engineering materials, high-performance alloy ratio, etc., cutting into the new energy vehicle parts business to open up the growth space. We estimate that after the company cut into the power battery package components, drive motor connectors, electronic control system inverter components and other products, the product market space in the automotive field has increased from 30-4.6 billion to 260-48 billion, and the products have passed the certification of Mercedes-Benz, Toyota and domestic head new energy vehicle companies.

Risk hint: the penetration rate of new energy vehicles is not as expected and the product expansion is not as expected.