Incidents: In the first three quarters of 2023, the company achieved revenue of 1,431 million yuan, a decrease of 4.97%, net profit of 42 million yuan, a decrease of 77.38%, net profit of 29 million yuan, net profit of 29 million yuan, an increase of 45.94%, and EPS of 0.19 yuan. In 2023Q3, the company achieved revenue of 557 million yuan, an increase of 7.50%, net profit of 41 million yuan, an increase of 558.56%, net profit of 38 million yuan after deducting non-net profit of 38 million yuan, a same increase of 1188.96%. The expansion of the company's automotive interior business in 2023Q3 led to rapid revenue growth and significant improvements in profitability. The operating situation was significantly better than the same period last year. Since 2023, performance has improved quarter by quarter, and production and operation trends have improved.
Comment:
Downstream demand was weak in the first three quarters of 23 years, and sales performance improved month-on-month. Under a general environment where market demand is weak, domestic and foreign sports brands are de-inventoried, and the real estate market is sluggish, downstream demand is weak. In the first three quarters of 2023, the company's main leather product sales revenue fell 1.32% year on year, mainly due to a 2.09% year-on-year decline in sales volume, but the decline was further narrower than in half a year. Among them, 23Q3's main leather product sales volume increased by 12.16% year on year, revenue increased 10.19% year on year, and the overall sales situation showed an upward trend.
Product structure optimization boosted the gross profit margin, and the initial operation of the Vietnamese project dragged down the profit level. 1) The company's gross margin increased by 2.91PCT to 19.98% in the first three quarters of 2023, mainly due to the further increase in cooperation between the company and brand customers, product structure optimization, and the increase in the proportion of high value-added products. 2) The sales, management, R&D, and financial expenses of 2023Q3 companies increased by 1PCT, -0.24PCT, 0.07PCT, 0.44PCT to 4.12%, 4.47%, 6.71%, and 0.91%, and the various cost rates remained stable. 3) The company's net profit declined sharply year-on-year in the first three quarters of 2023. On the one hand, non-recurring profit and loss of 159 million yuan was confirmed in the same period last year. On the other hand, overseas subsidiary Amway Vietnam invested heavily in employees and market development in the early stages of production. Losses in the first three quarters of 2023 increased 712.52% year on year to 155.61 million yuan.
The results of transformation and upgrading are beginning to show, and the core technology space is vast. The results of the company's transformation and upgrading are beginning to show, core technology continues to gain strength, and production and sales levels are rising rapidly. In 2023 Q3, the company's TPU production reached a quarterly high. In September 2023, the company's production of automotive interior products in that month reached a new monthly high since the company was founded. As of the third quarter of '23, the company's new automotive interior materials production zone has been put into use, and will actively promote the technical upgrading of equipment, such as construction of 3 production lines at the headquarters and 2 production lines at Amway Vietnam, lightweight equipment improvements, and flexibility improvements. The company focuses on developing emerging markets for automotive interiors, developing and cooperating with a large number of NEV brand customers, expanding business scale and increasing market share. The company expects the automotive interior category to show a “low base and high growth rate” development trend in the future, forming strong growth momentum.
Profit forecast and investment advice: We lowered the company's 2023-24 net profit forecast to 0.82 billion 168 million yuan (original value was 2/244 million yuan), an increase of -43%/103.3%, and increased the 2025 net profit forecast to 265 million yuan, an increase of 58.4%. The current stock price corresponds to 32.86 times PE in '23. We are optimistic that the company's strong R&D and innovation capabilities, the product and customer structure are constantly being upgraded, and that the expansion of emerging fields such as automobiles and electronics and the release of production capacity will drive performance growth and maintain the “buy” rating.
Risk factors: risk of rising raw material prices, capacity expansion falling short of expectations, downstream demand falling short of expectations