Summary of the announcement: The company released its three-quarter report for 2023. The first three quarters achieved revenue of 368 million yuan, an increase of 3.11% over the previous year, net profit of 101 million yuan, an increase of 23.82% over the previous year, and net profit of 81 million yuan after deducting non-return mother's net profit of 81 million yuan, an increase of 1 million yuan over the previous year.

17%

The short-term growth rate of performance has slowed, and profitability has remained at a high level. Looking at a single quarter, the company's 23Q3 revenue was 125 million yuan, down 7.43% and 2.5% year on year, and net profit was 27 million yuan, down 16.5% year on year. It was basically the same month on month, minus net profit of 26 million yuan, minus net profit of 26 million yuan, down 13.04% and 6.38% year on month. We believe that the slight decline in the company's performance in a single quarter is mainly due to the impact of the macro environment. The industrial control connector business is still weak, the progress of introducing new customers and new projects has slowed down, and emerging businesses such as automobiles and new energy have maintained relatively good growth. The comprehensive gross profit margin for the first three quarters was 42.15%, down 0.64pct year on year, and the net profit margin was 27.76%, up 4.79pct year on year, minus 21 non-net interest rates.

99%, down 0.42pct year on year, Q3 single-quarter gross profit margin was 41.94%, year-on-year and month-on-month decline of 0.28pct, 0.67pct, net profit margin of 21.9%, year-on-year decrease of 1.86pct, year-on-month increase of 0.4 pct, net profit margin minus 21.15%, year-on-year decrease of 1.36pct, year-on-month decrease of 0.88pct. Overall, the beneficiary products and customer structure have been optimized, expenses are well controlled during the period, and the company's profitability has remained at a high level. As the macro environment picks up, customers and volume expansion, the performance growth rate is expected to recover. The company recently announced a repurchase plan. It plans to use its own capital to repurchase some shares through centralized bidding transactions for later implementation of employee stock ownership plans or equity incentive plans. The total repurchase capital is not less than 30 million yuan (inclusive) and no more than 60 million yuan (inclusive), the repurchase price of shares does not exceed 70.00 yuan/share (inclusive), and the repurchase of shares is about 428,600 to 8571,000 shares, accounting for about 0.39% to 0.78% of the company's total issued share capital.

Leading local industrial control connectors, accelerating the expansion of automobile+new energy. Overseas manufacturers dominate the connector industry with technology and customer barriers accumulated over a long period of time. The localization rate of industrial, automotive and new energy connectors is currently low. Incremental opportunities brought about by innovative trends such as electric intelligence and industrial automation in downstream automobiles are reshaping the competitive landscape. As independent brands rise and seek supply chain security and cost reduction and efficiency, local connector manufacturers are ushered in good opportunities for development. The company is a high-quality supplier of scarce industrial control connectors in China. It has covered industrial control equipment and component manufacturers such as Huichuan Technology and Delta Electronics. Siemens, Schneider, etc. have been successfully introduced and are actively expanding overseas markets. In terms of products, there is already mass production of connectors related to industrial robots, which is expected to expand the application of humanoid robots and open up room for growth. The automotive sector uses three-electric system connectors as its main products, focusing on the deployment of front-end sensing (radar, high-speed camera) connectors, high-frequency high-speed connectors for intelligent driving, etc., and has already been supplied in batches to customers including new energy vehicle manufacturers such as BYD, Tier 1 such as Ikon Power, and some engineering vehicle manufacturers. At the same time, customer development efforts have been stepped up, and it has achieved indirect supply of medium and low voltage board end connectors to Cyrus. High-speed and high-frequency products are being connected. In terms of new energy, current products are mainly used in solar and wind energy inverter systems, laying out household storage, commercial storage and charging application scenarios to form comprehensive coverage of optical storage and charging, helping medium- to long-term development.

Technology continues to be updated and iterated to improve production capacity at home and abroad. The company adheres to product development and innovation-driven business strategies, and has set up electronic connector technology R&D centers and mold R&D and processing centers as specialized R&D institutions to carry out product research and development work. The R&D expenses for the first three quarters of 23 years were 49.23 million yuan, an increase of 14.93% over the previous year, accounting for 13.39% of revenue. It has mastered the core technology of high-performance professional connector products such as small-pitch floating board-to-board connectors, small-pitch high-frequency high-speed board-to-board connectors, and modular integrated connectors, and is widely used in key products in three fields. Some product models have reached or are close to international first-class The manufacturer's technical level is the same. The company has a full-process precision manufacturing system for precision mold design, development, precision stamping and injection molding, automated processing and inspection, etc., to effectively guarantee product accuracy and quality stability. At the same time, a platform-based product system is formed according to different characteristics such as product design structure, connection method, and functional characteristics, etc., to combine customized customer needs with product platform-based production to achieve cost reduction and efficiency. In terms of production capacity, the domestic headquarters in Dongguan is expected to be put into use one after another in 23Q4, and the Kunshan plant is undergoing a new round of expansion and expansion. It is expected that production will be put into operation by the end of 2024. The overseas Thai production base is undergoing relevant government approval procedures. After production is put into operation, it is expected that it will better meet the procurement needs of international customers and enhance overall resilience to risks.

Investment suggestions: The company is a leader in industrial control connectors in China. The expansion of automobiles and new energy sources is smooth, products and customers are constantly being enriched, and the downstream application boom and domestic connector substitution trend, performance is expected to usher in rapid growth. Taking into account short-term demand fluctuations, we adjusted our profit forecast. The estimated net profit for 2023-2025 was 147 million/205 million/274 million yuan (original forecast value was 171 million yuan/232 million/311 million yuan), and EPS was 1.33 yuan/1.87 yuan/2.49 yuan respectively, maintaining the “buy” rating.

Risk warning: rising prices and supply risks of major raw materials; risk of increased competition in the industry; risk of technological iteration; risk of fluctuations in the international macroeconomic and political situation.