3Q23 performance meets market expectations
The company announced results: 1-3Q23 income 4.149 billion yuan, year-on-year + 22.28%; return to the mother net profit 141 million yuan, year-on-year + 62.11%; deducting non-return net profit 156 million yuan, year-on-year + 62.74%. 3Q23 income is 1.588 billion yuan, same / month ratio + 31.27% take-up 17.95%; return-to-mother net profit 81 million yuan, same / month-on-month + 84.56% end-to-end 230.89%; deduction of non-return net profit 75 million yuan, same / month ratio + 81.51% plus 48.10%. The company's performance is close to the upper limit of the performance forecast.
Trend of development
"charge and distribution + cockpit" two-wheel drive, steam zero business helps the company's performance grow at a high speed. The production and sales of 3Q23 new energy vehicles increased by 17.2% compared with the same period last year, and the upgrading of replacement consumption of middle and high-end cars has led to a further increase in the penetration of the company's products among new power and national brands. The company accelerates the landing of new energy orders; innovative products in the cockpit business are recognized by market-leading customers. The significant improvement in the company's profitability is mainly due to the increase in the value of cockpit products and the improvement of export orders in weighing equipment business. The company's overseas auto zero business orders are full, and the cooperation project with the world's leading new energy customers is progressing smoothly; the construction of overseas production bases supports the landing of orders. We believe that the expansion of overseas production and the landing of orders are expected to inject sustained growth momentum into the company's performance.
The company continues to carry out action to improve quality and efficiency, and the level of operation and management has improved steadily. The cash flow generated by 1-3Q23's operating activities was 466 million yuan, an increase of 135.72% over the same period last year, mainly due to the company's revenue growth and normal collection of accounts receivable when due. The company's operating capacity improved, the number of days of accounts receivable turnover decreased to 62.2 days, and the inventory turnover rate decreased to 89.1 days. 3Q23 company sales management research expense rate of 14.3%, compared with the same month-1.7/1.9ppt, in which the rate of sales and management expenses decreased to 3.2% and 5.8% respectively. The gross profit margin of 1-3Q23 company is 24.8%, which is 25.4% compared with the same period last year and + 2.0ppt 1.4/1.3ppt. We believe that the company's optimization of production layout and product process is expected to continuously improve the resource allocation and production operation efficiency, and boost the gross profit level.
The company has purchased more shares in Qunying, demonstrating its determination to develop its business. According to the announcement, the company deliberated and passed a motion at 2023Q2, agreeing to buy 12% of Gunsheng Qunying held by Junsheng Electronics for 510 million yuan; registration procedures such as equity transfer have been completed in July 2023, and the company holds a 63% stake in Gunsheng Qunying after the purchase of additional shares. Qunsheng Qunying's domestic new energy market share is increasing, and we believe that the company's additional purchase of Qunying is expected to further thicken its performance and enhance its sustainable development ability.
Profit forecast and valuation
Due to the higher-than-expected growth of the company's 3Q23 profit, we raised our profit forecast for the 2023Universe 2024 cockpit business, which led us to raise the 2023Universe net profit of 3.9% for 2024 to RMB 2.06 billion. The current share price corresponds to the price-to-earnings ratio of 23.9 / 18.0 times of 2023 for 2024. We maintain our outperforming industry rating, in view of the bullish long-term growth of the company's cockpit and new energy business. We raise our target price by 15% to 43.10 yuan, corresponding to the price-to-earnings ratio of 27.7 times 2024 / 20.9 times 2024, which is 16% higher than the current share price.
Risk
Geopolitical risks, the risk of rising raw material prices, and the penetration of high-end models is less than expected.