3Q23 performance is in line with our expectations

The company announced 3Q23 results: realized income of 1.204 billion yuan, an increase of 7.06% over the same period last year, an increase of 22.19% over the same period last year; net profit of 99.37 million yuan, an increase of 8.79% over the same period last year and an increase of 43.76% over the same period last year; deducting 103 million yuan of non-net profit, an increase of 22.62% over the same period last year, an increase of 83.93% over the previous month (non-recurrent profit and loss are mainly government subsidies and investment income). The company's 3Q23 performance is in line with our expectations.

Trend of development

The demand for consumer electronics continues to improve, and the business of new energy vehicles develops steadily. According to Canalys,3Q23, the year-on-year decline in global smartphone shipments narrowed to 1%, with Android phone shipments basically flat. According to CleanTechnica,2023, global sales of new energy passenger cars were 1.2385 million in August, an increase of 45 per cent over the same period last year.

Short-term fluctuation of profitability and long-term layout of continuous R & D investment. 3Q23's gross profit margin is 26.9%, down 2.21ppt from the same period last year, and the gross profit margin fluctuates in the short term, which we judge is mainly due to the increase in Android revenue.

3Q23 sales expense rate increased 0.03ppt year-on-year, management expense rate decreased 0.61ppt, financial expense rate increased 2.49ppt year-on-year, we are optimistic that the company will further optimize resource allocation and cost control.

The R & D cost of 3Q23 was 90.52 million yuan, an increase of 4.79% over the previous month, and the company continued to maintain a high R & D investment.

It is optimistic that consumer electronics demand will pick up further, as well as new energy business capacity expansion and new business expansion.

According to the fact that IDC,2024 's global smartphone shipments are expected to grow by 4.5% to 1.2 billion units compared with the same period last year, we are optimistic that the company's revenue from functional parts and precision structural parts will pick up and improve with the end demand. In terms of new business development, the company deeply excavates the development opportunities in the areas of hydrogen fuel cell core components, new energy wireless charging system and energy storage.

Profit forecast and valuation

We keep our profit forecast for 2023 unchanged. Taking into account the uncertainty of the recovery of consumer electronics demand, we have lowered our 2024 homing net profit forecast by 6.8 per cent to 447 million yuan. The current share price corresponds to 27.5 times 2024 / 21.5 times Pdebase E in 2024. To maintain the industry rating of outperforming, based on the long-term optimistic about the development space of the company's new energy vehicle business, keeping the price of 16.0 yuan unchanged, corresponding to 24.1 times 2024 Phand E, there is 11.7% upward space compared with the current stock price.

Risk

Consumer electronics demand is sluggish; new energy car customer shipments fall short of expectations; Weibo Precision continues to lose money.