Incident: The company released its report for the third quarter of 2023 on October 31. Q1-Q3 in '23, it achieved operating income of 1,334 billion yuan, net profit of 150 million yuan, net profit of 150 million yuan, -9.8% year-on-year, and net profit of 131 million yuan, minus net profit of 131 million yuan, -8.9% year-on-year.
Comment:
The number of differentials continued to be released, and Q3 revenue reached a record high. On a quarterly basis, Q3 in '23 achieved operating income of 509 million yuan (+41.5% yoy), net profit of 60 million yuan (+25.5% yoy), gross sales profit margin of 29.7% (y-2.4 pct), and net sales profit ratio of 11.8% (y-2.0 pct).
The increase in revenue is mainly due to the continued release of differential products, the recovery in commercial vehicle prosperity leading to an increase in synchronizer sales, etc., while the decline in profitability is mainly due to the high fixed cost of differential amortization, changes in the product structure of aviation business settlement, and a sharp increase in financial expenses.
Various business lines are developing steadily, and the business situation continues to improve. 1) Synchronizers: Passenger car synchronizers and integrated gears have achieved good growth due to increased bicycle value, increased market share, and significant growth in domestic vehicle export business; commercial vehicle synchronizers have benefited from improved downstream prosperity, AMT business continues to grow, and new customers for new projects have all been added. 2) Aerospace: Benefiting from the increase in demand for civil aircraft, there are currently plenty of orders and tight production tasks, and the scale of business will continue to grow. 3) Differential: Currently in the stage of rapid volume growth, Luzhou Haoneng's operating income has exceeded 40 million yuan/month. With the gradual commissioning of the differential shell casting line, the differential business revenue will reach a new high, and the share of assembly revenue will also increase rapidly, and gross margin will also improve markedly with the increase in production capacity scale and product restructuring. 4) Planetary reducer: We have obtained the relevant fixed points for some parts of automotive precision planetary reducers, and mass production will begin in Q4.
Build motor shaft production capacity and increase new energy business. The company plans to raise 550 million yuan for the “Construction of a Production Base for Key Components of New Energy Vehicles” project, invest in the construction of motor shafts for new energy vehicles, enrich the company's NEV-related products, and improve the layout of the existing automobile industry. The company's motor shaft-related equipment is being installed and tested one after another. The company has carried out technical exchanges, project exchanges, product samples, price communication, and demand communication with many well-known transmission manufacturers and electric drive assembly suppliers, etc., and has received approval for some customer projects.
Profit forecast and investment rating: The company's products revolve around automobile transmission systems, have a high self-sufficiency rate, have cost advantages, and have received orders from mainstream new energy OEMs. Performance is expected to grow strongly as production capacity is released; the forward-looking layout of the robot and satellite industry chain lays the foundation for medium- to long-term development. We expect the company's net profit from 2023-2025 to be 2,00, 2.70 million yuan, and 350 million yuan, corresponding to PE of 25, 18, and 14 times, respectively, maintaining the “buy” rating.
Risk factors: Fluctuations in raw material prices, production capacity release falls short of expectations, customer development falls short of expectations, sales volume of supporting models falls short of expectations, and progress of production base construction projects for key components of new energy vehicles falls short of expectations.