Event: The company released its 2023 three-quarter report. From January to September 2023, the company achieved operating income of 3.697 billion yuan, +26.97% year-on-year, net profit of 107 million yuan, +90.75% year-on-year, and performance exceeding expectations.

The transformation of new energy vehicles is beginning to bear fruit, successfully breaking through many key models such as BYD. The company's revenue in the third quarter increased month-on-month, and the transformation of new energy passenger vehicles is beginning to bear fruit. In the 1-3 quarter of 2023, the company entered into various models such as BYD Seagull air conditioning boxes, SAIC GM K platform air conditioning boxes, SAIC Motor Group's overseas export air conditioning boxes, and NIO. 2023H1 disclosed additional orders exceeding 2.5 billion yuan. In May 2023, the first delivery of the BYD Seagull model began. Q3 sales reached 102,900 units, +165.26% over the previous year. Various models in BYD Ocean Network led to an increase in the company's revenue. Looking ahead, the company is actively supporting various models such as BYD, and more blossoms are expected to release significant revenue elasticity.

The supplier of the HUAWEI Chery heat pump air conditioner will increase the room for imagination in the future. The company supplies heat pump air conditioning box systems as a supplier of thermal management products for Chery and Huawei models. The first model, the Zhijie S7, is positioned as a medium sized pure electric coupe. It is expected to be launched in late November. It is equipped with high-end intelligent configurations such as the Hongmeng HarmonyOS 4 system and Huawei's advanced intelligent driving system ADS 2.0, which is expected to repeat the impressive performance of the new M7. The company provides a full range of platform-based models for Chery and Huawei, and the ASP is expected to further increase to 1,500-2000 yuan (higher than the traditional air conditioner box of 1,000-1500 yuan).

Bus leaders are actively deploying the passenger car business to see results, and the two-wheel drive is steadily improving. The company is a leader in the bus air conditioning segment. The growth in bus exports has driven bus sales to the bottom and rebounded. Traditional business performance is good. Other businesses, including automotive spare parts, compressors, and battery thermal management for energy storage power plants, etc., have blossomed. Among them, the battery thermal management business has entered the supporting systems of energy storage system integrators such as Ningde era, BYD, Envision Energy, and Sunshine Power. The company's commercial vehicle transformation and passenger vehicle expansion and transformation have been refined in recent years, and a second path of growth has begun. The new forces of BYD+Huawei+ are expected to drive the company's profits to increase significantly from 2023 to 2025.

Profit forecast and rating: We expect the company's total operating revenue from 2023 to 2025 to be 48.51, 63.32, and 7.294 billion yuan, up 14.81%, 30.53%, and 15.20% year on year, and net profit of 1.43, 2.03, and 274 million yuan, up 52.43%, 41.80%, and 34.90%, corresponding to PE 35.44, 24.99, and 18.52 times, respectively.

Risk warning: NEV sales volume falls short of expectations; risk of raw material price fluctuations; increased industry competition, etc.