Events: The company released its three-quarter report for 2023. In the first three quarters of 2023, the company achieved operating income of 452 million yuan, a year-on-year increase of 13.76%, net profit of 101 million yuan, a year-on-year increase of 1.24%, net profit of 98.64 million yuan, a year-on-year increase of 2.99%; in the third quarter of 2023, the company achieved operating income of 164 million yuan, a year-on-year increase of 13.15%; realized net profit of 29.52 million yuan, a year-on-year increase of 1.03%; achieved net profit of 28.72 million yuan, year-on-year increase of 28.72 million yuan, year-on-year Growth of 1.32%; in line with market expectations.
Benefiting from the rapid expansion of new products, 2023Q3 revenue is growing at an accelerated pace.
(1) Growth analysis: In the third quarter of 2023, the company's revenue was 164 million yuan, up 13.15% year on year and 11.15% month on year; mainly because ① market revenue in the fields of smart metering, healthcare, safety monitoring, and environmental testing increased rapidly; ② revenue in the air quality sector declined slightly. The company's four business areas of smart metering, healthcare, safety monitoring, and environmental monitoring are in a stage of rapid development. Each business area accounts for a relatively low share of revenue, and the company's air quality business accounts for a high proportion of total revenue, which has a great impact on the growth rate of revenue. In the first three quarters of 2023, the company's net profit growth rate was lower than the revenue growth rate, mainly because ① in order to increase investment in R&D of new products, the company's R&D expenses increased 28.23% year on year; ② in order to increase market development efforts, the company's marketing system talent pool grew, domestic and foreign advertising, travel expenses and exhibition expenses increased, and the company's sales expenses increased 19.96% year on year; ③ The company's sales expenses increased 19.96% year on year; The company's sales expenses increased 19.96% year on year; The company's Jiashan Park was opened and put into operation, and investment in labor and depreciation increased. The company's management expenses increased 26.45% year on year; ④ Due to the decrease in interest income and exchange income from the company's deposit and raising accounts, the company's financial expenses The absolute value increased by 45.49% year over year.
(2) Profitability analysis: In the third quarter of 2023, the company's gross sales margin was 42.90%, up 3.35 pct year on year; in the third quarter of 2023, the company's net sales margin was 18.43%, down 1.84pct year on year. As the company increased investment in product development and market development, the impact on the growth rate of net profit was significant. The sales/management/finance expense ratios were 7.90%, 5.39%, and -1.90%, respectively, with year-on-year increases of 0.41 pct, 0.54 pct, and 2.06 pct, respectively. The increase in financial expenses was mainly due to a decrease in interest income and exchange income from deposit and fund-raising accounts.
(3) Operating capacity and operating cash flow analysis: As the revenue scale of vehicle customers increased, the company's accounts receivable turnover days increased. The company's accounts receivable turnover days for the first three quarters of 2023 were 100.65 days; the company's cash flow level increased, and net operating cash flow was 54.8583 million yuan, an increase of 28.09% over the previous year.
(4) Continued R&D innovation: The company continued to increase R&D investment. In the first three quarters of 2023, the company's R&D expenses were 48,3696 million yuan, up 28.23% year on year; R&D expenses accounted for 10.70% of operating income, up 1.21pct year on year; at the end of June 2023, the company obtained a total of 154 patents, including 44 invention patents; 4 national key new products; passed 4 provincial scientific and technological achievements; and received 1 Hubei Patent Gold Award.
Deeply cultivating the automotive industry chain, the on-board sensor layout has been further improved.
(1) Since obtaining IATF 16949:2016 automotive quality management system certification in 2017, the company's in-vehicle sensor product line has been further extended, and the product application range has covered a wider range of models from the initial high-end models to a wider range of models. The company's in-vehicle sensor business mainly includes automotive comfort system sensors, car air improvement devices, safety system sensors, and high temperature gas sensors.
(2) 2023H1, the company has added about 7 million new in-vehicle sensor projects. The company's in-vehicle sensor business has expanded from automotive comfort system sensors to in-car air improvement devices. In-vehicle sensors have shown a good development trend in both fuel vehicles and new energy vehicles, paving the way for subsequent performance growth.
(3) 2023H1, the company's automotive comfort systems are the main vehicle sensor business, which continues to maintain good growth. Power battery thermal loss monitoring sensors have been supplied in batches, and engine emission oxygen sensors continue to be supplied in large quantities. It has actively promoted engine emission nitrogen and oxygen sensor products to target customers such as diesel vehicle engine manufacturers and exhaust emission post-treatment system manufacturers. Phased progress has been achieved. The three highest automobile tests (high temperature, plateau, high cold) are nearing completion.
The company has also extended the development of car seat fans in the automotive industry chain, 2023H1. The company's car seat fan products have entered the small-batch pilot stage.
Introduce an equity incentive plan to demonstrate confidence in long-term development.
The company recently announced a restricted stock incentive plan. It plans to grant 1,662 million restricted shares and 415,000 reserved restricted shares to 167 incentive recipients (collectively accounting for about 2.97% of the total share capital at the time of announcement). This incentive performance assessment target is based on 2022 revenue. The 2023-2026 revenue growth rates are not less than 15.00%, 32.25%, 52.09%, and 74.90%, respectively, corresponding revenue of 692/796/9.16/1,053 billion dollars. The implementation of this incentive plan is conducive to further attracting and retaining core cadres, fully mobilizing their enthusiasm and creativity, effectively enhancing core team cohesion and enterprise core competitiveness, and ensuring the achievement of the company's development strategy and business goals.
Maintain the “Overweight” rating. Considering factors such as the slowdown in new downstream demand in the civil air quality sector, we adjusted the company's net profit for 2023-2025 to 1.68, 2.21, and 284 million yuan (previous values were 2.55, 3.51, and 447 million yuan), up 15%, 32%, and 28% year-on-year respectively; according to the stock price on November 3, 2023, the corresponding PE was 33.1, 25.0, and 19.5 times, respectively, maintaining the “increase” rating.
Risk warning: risk of new business development falling short of expectations; risk of exchange rate fluctuations; risk of increased market competition; risk of fluctuations in raw material prices.