incident. On October 27, the company released its 2023 three-quarter report. In the first three quarters of 2023, the company achieved operating income of 813 million yuan, YoY +4.20%; net profit of 128 million yuan, YoY + 24.94%.

In the Q3 of 2023, the single quarter achieved revenue of 310 million yuan, YoY -0.64%; net profit of 55 million yuan, YoY +16.72%.

The company's profitability has been steadily improving, and the automotive electronics business has developed steadily. In the first three quarters of 2023, the company achieved operating income of 813 million yuan, up 4.2% year on year; realized net profit of 128 million yuan, up 24.94% year on year; revenue and profit increased steadily. Among them, Q3 achieved operating income of 310 million yuan and YoY -0.64% in a single quarter; realized net profit of 55 million yuan, YoY +16.72%; gross sales margin in a single quarter reached 30.04%, +1.27 pct over the previous quarter, and net sales margin was 17.89%, +2.1pct over the previous quarter, and profit levels continued to increase. The company continues to strengthen its automotive electronics business layout. In terms of traditional automotive business, the company, as one of the main suppliers supporting leading customers in the automotive industry such as Bosch and Brose in the early days, provided them with core components and established close long-term cooperative relationships with customers. In the new energy vehicle business, the company actively grasps the opportunities for the rapid development of independent automobile brands and the continuous improvement of the level of automotive electronics, and continuously strengthens product technology research and production. In the first three quarters of 2023, the company incurred R&D expenses of RMB 92,513,300, an increase of 12.20% over the same period last year.

Actively develop a global layout and explore MR market opportunities. The company attaches importance to overseas market business development, actively lays out overseas business divisions, and has set up a German second-tier subsidiary as a window for developing the European market. The company will also actively seize new opportunities for overseas market development, explore new overseas customers through multiple channels, and seek new export business. At the same time, the company closely follows the development trend of the XR/MR industry and actively develops products that can be applied to the field of virtual reality. Existing products such as magnetic sensing systems, pupil distance adjustment drive systems, and automatic head tightening devices can be applied to the virtual reality field. In the future, as the company continues to expand its own scale and achieve the strategic goal of a higher level of production capacity layout, it may help the company's long-term performance development.

Profit forecasts and investment ratings. We predict that the company's net profit from 2023-2025 will be 1.83/2.52/348 million yuan, and the current stock price corresponding to PE is 69/50/36 times, respectively. Based on the company's adherence to technological innovation, promotion of high-end product layout, and active market expansion, we are optimistic about the company's future performance development and maintain a “buy” rating.

Risk warning: risk of macroeconomic fluctuations, risk of market competition, risk of tight supply of raw materials and price fluctuations, risk of rising labor costs.