Revenue growth is driven by the volume of acoustic systems. The company achieved operating income of 1,593 billion yuan in the first three quarters, +32.66% year-on-year, and net profit of 107 million yuan, +82.95% year-on-year. Among them, 2023Q3 achieved revenue of 629 million yuan, +31.17% year-on-year, +23.14% month-on-month, and net profit of 36 million yuan, +62.22% year-on-year, and -12.81% month-on-month. The company's revenue growth was due to the increase in orders from new energy customers (NIO, Ideal, Huawei, BYD supply chains, etc.) and the release of orders for acoustic systems. In terms of new energy customers, NIO's revenue share increased to 10.3% in 2022, and Huawei entered the fifth largest customer, and its revenue share increased to 7.6%. NIO delivered 55,400 vehicles in Q3, +75.4% year-on-year and +135.7% month-on-month; ideally, 105,100 vehicles were delivered in Q3, up 296.3% year on year. As sales in the Q3 market rebounded, the number of new energy customers would continue to drive the company's growth.
Gross margin increased steadily, and foreign exchange affected the increase in expenses in the third quarter. The company's 2023Q3 sales margin was 24.82%, +6.04pct year on year, +0.06pct month on month, net sales profit margin 5.64%, +0.98 pct year on year, and -2.40 pct month-on-month. The increase in gross margin in the first three quarters was due to a decline in raw material prices. The company's core component, included rare earths in the raw materials of NdFeB magnets. The price of rubidium iron boron fell by about 28% at the end of the third quarter compared to the beginning of the year. On the cost side, the financial expense ratio of 2023Q3 companies was 2.45%, +5.54 pct over the previous quarter. Compared with the second quarter, exchange earnings were reduced in the third quarter, and net interest rates declined month-on-month. The company maintains high R&D expenses, focuses on developing growing electronic and acoustic application software, and builds a core technology platform in the four R&D directions of acoustic product simulation and design, vehicle audio design, acoustic signal processing, and digital speaker systems.
A high-quality acoustic track. As the company's acoustic system increases, its overall competitiveness has improved. The company's global and domestic market shares of the company's car speaker business in 2022 were 13% and 21% respectively, maintaining its leading edge in the industry. At the same time, the company increased the development of car audio systems and electronic product projects: 1. The production base in Suzhou already has parts production capacity for car speakers, car amplifiers, AVAS and related products, and has exported process technology to achieve global local supply, and established car speaker production bases in the Czech Republic, Brazil and Mexico. 2. In terms of core components, Yanlong Electronics and Lexi Audio are production bases for paper pots and tray stands to ensure the ability to make self-made parts. 3. In terms of sales and network layout, establish sales, after-sales and technical support teams in China, the United States and Germany. 4. In terms of new production capacity, Rusheng Electronics has accepted three production lines, and the new Hefei plant is progressing steadily.
Risk warning: Automobile industry sales fall short of expectations, customer development risk, raw material price increase risk, peer competition risk, policy risk, market risk, and technical risk.
Investment advice: Lower the profit forecast and maintain the “increase in holdings” rating. It is predicted that the company's net profit from 2023-2025 will be 1.60/2.50/3.56 (originally 1.70/2.73/401 million yuan), an increase of 83.3%/56.4%/42.5% year-on-year, maintaining the “increased holdings” rating.