On October 29, Longsheng Technology released its report for the third quarter of 2023: the third quarter of 2023 achieved operating income of 452 million yuan, +52.66% year-on-year; net profit of 25 million yuan, -7.80% year-on-year.
The results for the third quarter of 2023 were in line with expectations, and revenue grew steadily. In the first three quarters of 2023, the company achieved operating income of 1,187 billion yuan, +47.03% year-on-year; net profit of 97 million yuan, +44.69% year-on-year. Among them, 2023Q3 achieved revenue of 452 million yuan, +52.66% over the same period last year. The net profit of the mother was 225 million yuan, -7.80% over the same period last year. Among them, revenue growth mainly benefited from: 1) iron core business: smooth transformation of customer production lines and increased production capacity utilization; 2) EGR: passenger car hybrid model support began to be released; and 3) smooth expansion of military business. The decline in net profit of the company was mainly due to delays in repayment of the core business.
It mainly focuses on the three major business segments, and its competitiveness continues to increase. 1) EGR system sector: The automobile and non-road machinery supporting business is growing steadily and has entered the hybrid model supply chain of car companies such as BYD; the natural gas jet rail assembly project has been targeted by new end customers and is expected to contribute to annual revenue. 2) Motor core sector: Customer and product systems have been further improved, and multiple customer project targets such as Fordi Power have been added. 3) Precision parts business segment: The main business of the subsidiary Weiyan Seiko continues to achieve mass production of new projects, and continues to expand the volume of cooperation with existing customers and expand new customers by relying on the scientific and orderly nature of the R&D process. At the same time, Weiyan Zhongjia has design, processing and manufacturing capabilities for aerospace, military, etc., and has passed a three-level confidential qualification certificate. The reliability and stability of the products are effectively guaranteed.
The equity incentive target is positive, demonstrating the company's confidence. The number of restricted shares granted for the first time was 2,499 million shares, the price was 11.48 yuan/share, and the number of people was 109. Based on 2022, the revenue growth rate for 2023-2025 was 50%/120%/180%, respectively, and the corresponding operating income was 17.2/25.3/3.21 billion yuan; the net profit growth rate was 90%/200%/300%, respectively, and the corresponding net profit was 1.4/23/ 300 million yuan.
Investment suggestions: Taking into account the pace at which production capacity is climbing, etc., we slightly adjusted our profit forecast for 2023-2025, giving operating income of 17.8/26.6/3.5 billion yuan (original value: 21.5/31.2/40.8 billion yuan), +55%/+49%/+32% of the same period last year, and 1.6/2.3/3.2 billion yuan (original value: 1.8/2.9/4.1 billion), respectively, as net profit of the mother, +106%/+48%/+38%. Based on the closing price of October 30, 2023, the company's current market value is 4.65 billion yuan, corresponding to the 2023-2025 PE of 29.8X, 20.1X, and 14.5X, respectively, maintaining the “buy” rating.
Risk warning: Core customer sales volume falls short of expectations, business and production capacity expansion falls short of expectations, exchange rate, tariffs, raw material price fluctuations, and customer price reductions.