Description of the event
On October 31, 2023, the company released its report for the third quarter of 2023: the first three quarters of 2023 achieved operating income of 2,746 billion yuan, +14.85%; net profit of 387 million yuan, +22.86%; net profit after deduction of 374 million yuan, +19.62% year-on-year. Among them, Q3 achieved operating income of 1,012 billion yuan, +0.18% year-on-month, +11.48%; net profit of 139 million yuan, +6.33% year-on-year, -1.49%; net profit after deduction of 137 million yuan, +6.49% month-on-month; and net profit after deduction of 137 million yuan, +6.49% year-on-month, +1.29% month-on-month.
Incident reviews
The company's 23Q3 revenue increased slightly year-on-year, and gross margin declined month-on-month. The company achieved revenue of 1,012 billion yuan in 23Q3, +0.18% year-on-year and +11.48% month-on-month. The company's core customer, Tesla, upgraded production lines in Q3, and factory shutdowns may be the main reason for the slight year-on-year increase in the company's Q3 revenue. The company's Q3 single-quarter gross margin was 23.69%, +0.64pct year-on-year and -2.96pct month-on-month. We think the month-on-month decline may be related to changes in revenue structure (export business with higher Q2 gross margin accounts for a relatively high share of revenue).
The cost rate for the Q3 period was 6.64%, +1.26pct, +0.16pct month-on-month, of which the sales, management, R&D, and financial expense rates were 0.24%/2.29%/4.42%/-0.32%, year-on-year -0.02/+0.19/+1.60/-0.51pct, and -0.03/-0.67/+0.22/ +0.65pct, respectively. The company has strong cost control capabilities. With the gradual commencement of fund-raising projects, it is expected that market share will be further expanded with sufficient production capacity, and performance elasticity is expected to increase further.
It has received new project targets for leading domestic NEV customers, and the integrated die-casting business is progressing rapidly.
On September 9, 2023, the company issued an announcement. Kunshan Daya, a wholly-owned subsidiary of the company, has received targeted letters of intent from leading domestic NEV customers to provide them with integrated die-cast rear floor components. The project is expected to begin mass production in 2025, and the total sales volume for the entire life cycle is estimated at 21-2.3 billion yuan. The company's process capability in integrated die-casting business continues to be recognized by key customers, and its market competitiveness has been further enhanced. At the same time, the company plans to build a new “automotive precision parts and integrated chassis structural parts project” in the Jiangsu Jintan Economic Development Zone to expand its layout in the field of integrated die-casting. The project has a total investment of about 3 billion yuan, and is expected to increase annual sales revenue by 1.7 billion yuan after delivery. We believe that integrated die casting will be applied on a large scale in the future. As orders for the company's newly expanded customer models increase, this business will bring greater business revenue and net profit growth to the company.
Investment advice
We fine-tuned our profit forecast. We expect the company's net profit from 2023-2025 to be 5.33/6.53/796 million yuan, up 19.4%/22.5%/21.9%, respectively. The corresponding EPS is 2.90/3.55/4.33 yuan, corresponding to the closing price of 48.83 yuan on October 31, 2023, and PE 16.8/13.1/11.3 times respectively. Maintain a “buy-A” investment rating.
Risk warning
The growth in automobile production and sales fell short of expectations; the development of new businesses fell short of expectations; the impact of large fluctuations in raw material prices; and the risk of increased competition in the industry.