Incident: The company released its report for the third quarter of 2023. In the third quarter of 2023, the company achieved revenue of 136 million yuan, up 17.9% month-on-month, down 8.3% year-on-year, and realized net profit of 10 million yuan, up 221.3% month-on-month and 45.7% year-on-year.
The profit of the 2023Q3 automobile business was about 13 million yuan, and the revenue and profit improved significantly from month to month. In the third quarter of 2023, due to the impact of the military business, the company's single-quarter performance declined year-on-year, but according to our estimates, excluding the impact of the military business, the company's automobile business recorded a profit of about 13 million yuan. If depreciation and amortization generated by the construction of new production capacity such as the new plant in Wuxi was excluded, the company's automobile business maintained positive growth year-on-month in the single quarter. In the third quarter of 2023, the company's gross margin recorded 22.9%, which was basically the same from the previous month, down 5.3 pcts from the previous year. It is expected that after the new factory and military business in Wuxi are expanded, the company's gross margin will return to 30%.
The metal parts product matrix continues to improve, and the plastic parts business has benefited from the lightweighting of automobiles and ushered in high growth. The company's products are a metal+plastic product matrix mainly represented by automotive chassis systems, interior and exterior parts such as headlights and seats, automotive body systems, and electronic control system fasteners for new energy vehicles. The company's products are positioned as small to medium size fasteners, which have a higher level of added value and gross margin. The estimated value of small to medium size fasteners and connectors for bicycles is 800 yuan. In the middle of development, the company tied to overseas leading tier 1, fully demonstrating its product development capabilities. In the new energy era, the company's metal+plastic parts are two-wheel drive, further increasing the value of bicycles.
New plant capacity expansion, automotive+military industry boosts business collaboration. In terms of production capacity distribution, the company's Wuxi plant will enter a production capacity climbing cycle in 2023. The company will focus on introducing high-value-added products and use automation equipment in the new factory to reduce technical costs; the company's Zhenjiang plant will be put into operation in 2024, which will further expand the company's production capacity. Looking at the new business layout, the company focuses on strengthening cooperation with OEMs and has achieved many important breakthroughs in new energy vehicle projects, including new energy power exchange component projects, new energy chassis and vehicle body connection fastener projects, and electronic control system fastener projects. In addition, the company is also expected to achieve breakthroughs in the development of new NIO Auto projects, GAC power exchange projects, Bosch hydrogen battery projects, and power systems. We believe that the company has strong R&D and manufacturing capabilities in the fastener segment, and that automotive+military business collaboration will achieve steady growth.
Investment advice: The company's net profit for 2023-2025 is expected to be 0.9/1.5/230 million yuan, EPS is 0.83/1.45/2.21 yuan, respectively, and the price-earnings ratio is 34.46/19.57/12.90 times, respectively, giving a “buy” rating.
Risk warning: Market competition is intensifying, and the pace of new business development falls short of expectations.