Incident: On the evening of October 27, the company disclosed its report for the third quarter of 2023. According to the company's third quarterly report, the company achieved revenue of 2,859 billion yuan, +6.00% year-on-year; realized net profit of 1.4 billion yuan, -194.49%; and realized net profit deducted from non-treasury net profit of 170 million yuan, -315.52% year-on-year. In the single quarter of 2023Q3, the company achieved revenue of 1,161 billion yuan, 13.15% year-on-year; realized net profit of 51 million yuan, -206.07%; and realized net profit after deducting non-treasured net profit of -0.6 billion yuan, -236.91% year-on-year.
23Q3 revenue grew steadily, and the profit side continued to be under pressure. Affected by the increase in overall vehicle loading volume and revenue share of major customers, the company's performance on the revenue side improved, with 23Q3 revenue increasing 6.00% year over year. However, the profit side continues to be under pressure. The decline in net profit is mainly due to a sharp increase in R&D expenses. In order to meet strategic development needs such as forward-looking product layout, product update iteration, and technological innovation reserves, etc., the number of R&D personnel increased dramatically in 23Q3. The R&D expenses in a single quarter reached a record high of 282 million yuan, +67.96% over the same period and +27.92% over the previous month.
In terms of profitability, the gross sales margin for the first three quarters of 23 years was 27.52%, and the net sales margin was -4.91%, down 10.41pct from the previous year. As the company's R&D investment in domain controllers, high-level autonomous driving solutions, and the development of autonomous tool chains gradually shows results, a complete product layout will help greatly improve the company's performance.
The R&D investment is beginning to show results, and the product layout is gradually improving. (1) Electronic products: The company launched a seventh-generation front-view monocular camera controller, combining the advantages of a higher-performance 800W pixel camera, advanced visual EQ6 solutions, and mature control algorithms to launch a new generation of front-view monocular camera solutions; in order to further meet users' requirements for driving and riding comfort, the company launched a new generation of intelligent electric seat control modules. (2) R&D services and solutions: As one of the earliest suppliers to develop hardware-in-the-loop simulation test systems in China, the company launched DeskHil, a highly integrated standard desktop-level test system; the company officially released comprehensive driving test simulation software - ModelBase-AD, ModelBase-AD version, which has functions such as vehicle dynamics simulation, scene simulation, sensor simulation, data processing, etc., which can realize vehicle dynamics domain, chassis domain, and intelligent driving domain algorithm MIL/SIL/HIL/PIL/VIL simulation tests, and at the same time Supports application scenarios such as cloud simulation, V2X, and data twins; (3) High-Level Intelligent Driving Overall Solution: The company focuses on developing third-generation HAV, as a vehicle platform for high-level intelligent driving solutions in port scenarios. Its carrying capacity, dynamic characteristics, energy consumption characteristics, and appearance effects have all been significantly improved compared to the previous generation of products. In October 2023, the company signed the second phase of the unmanned horizontal transportation project with Longgonggang (using second-generation self-developed HAV models).
We are optimistic about the long-term development of the company, and equity incentives boost employee confidence. On September 27, the company issued the “Administrative Measures for the Implementation and Assessment of the 2023 Restricted Stock Incentive Plan”, which intends to provide restricted stock incentives to directors, core technical personnel and other personnel deemed necessary by the board of directors, excluding the company's independent directors and supervisors, for a total of 621,600 shares, accounting for 0.52% of the company's total share capital, and the grant price is 75 yuan/share. Also, at the company level, it is required that within the four fiscal years 2023-2026, based on 2022 operating income, the annual revenue growth rate should not be less than 15%, 35%, 65%, and 100%, respectively. At the individual level, the incentive target assessment target is required to reach A or B+. When both the company level and the individual level of the incentive target meet the performance assessment standards, the incentive target can lift the corresponding amount of restricted stocks. This equity incentive can improve the company's long-term incentive mechanism, attract and retain outstanding talents, fully mobilize team enthusiasm, and boost employee confidence.
Investment suggestions: Based on the company's performance report for the third quarter of 2023, we adjusted the company's net profit from 2023-2025 to -0.92/231/464 billion yuan, corresponding to PE multiples of 61 and 31 times in 2024 and 2025, respectively. Considering that the company is a leader in the localization of high-quality Tier-1 and intelligent driving domain controllers for domestic automotive electronics, it has profoundly benefited from the high growth in the field of intelligent driving and maintained a “buy” rating.
Risk warning: Downstream demand falls short of expectations, automotive intelligence progress falls short of expectations, and market competition increases risk.