The company issued an announcement that 2023Q3 achieved revenue of 1,588 billion yuan, +31.3% year-on-year; realized net profit of 81 million yuan, +84.6% year-on-year; achieved net profit of 75 million yuan, +81.5% year-on-year; and achieved net profit of 75 million yuan, +81.5% year-on-year, and performance close to the forecast limit. The company's performance increased dramatically, mainly due to the steady increase in the installation rate of auto parts products in OEMs, compounded by improvements in the company's operating efficiency. At the same time, the company increased its shareholding in Joyseng Qunying by 12%, which is expected to further increase the company's profits. Considering the impact of the above increase in profit, we raised the company's 2023/24/25 non-return net profit forecast to 220 million/285 million/354 million yuan, and the corresponding non-return EPS forecast to 1.67/2.16/2.68 million yuan, giving the company 25 times PE for 2023, corresponding to the target price of 42 yuan, maintaining the “buy” rating.

New energy products and customers continued to expand, and 23Q3 performance increased significantly. On October 30, 2023, the company issued an announcement. In the first three quarters of 2023, the company achieved revenue of 4.149 billion yuan, +22.3% year-on-year; realized net profit of 141 million yuan, +62.1% year-on-year; and achieved net profit of 156 million yuan, +62.7% year-on-year. Among them, 2023Q3 achieved revenue of 1,588 billion yuan, +31.3% year-on-year; realized net profit of 81 million yuan, +84.6% year-on-year; achieved net profit of 75 million yuan, +81.5% year-on-year; and achieved net profit of 75 million yuan, +81.5% year-on-year, and performance close to the forecast limit. The company's performance increased dramatically, mainly due to the steady increase in the installation rate of innovative smart cockpit products and new energy charging and distribution systems in OEMs, compounded by improvements in the company's operating efficiency. At the same time, the company increased its shareholding in Joyseng Qunying by 12%, further increasing the company's profits.

Operational efficiency was continuously optimized, and gross margin increased month-on-month. The gross margin of 2023Q3 company was 25.4%, +1.4pcts year over year and +1.3 pcts month-on-month. The company's gross margin increased month-on-month, mainly due to full orders in the auto parts business and improved operating efficiency. At the same time, the company continues to optimize the production layout and process plans of the weighing equipment business to improve resource allocation efficiency and production and operation efficiency. The 2023Q3 company's cost rate for the period was 16.6%, +0.6pct year over year, +0.8 pct month-on-month, of which the sales expense rate was 3.2%, +0.4pct, month-on-month -0.7 pct; management expense ratio was 5.8%, y-1.0pct, month-on-month -1.2pcts; R&D expense rate was 5.3%, y-1.1 pct, +0.1 pct month-on-month; financial expense rate was 2.3%, +2.3pcts year over year, +2.7pcts month-on-month.

Continued deployment of innovative cockpit products and steady revenue growth. The company is a leading supplier of automobile cockpit components in China. Its products mainly include real wood aluminum trim parts and air conditioning vents. The company continues to break through new energy customers and bid for luxury decoration projects of the world's leading new energy OEMs in 2022. The total life cycle value of the project exceeds 2 billion yuan. The company announced in August 2023 that it plans to invest 74 million yuan to expand the annual production capacity of the Mexican production line to 1 billion yuan to better serve the world's leading NEV companies and expand the company's market share in North America. At the same time, the project is expected to reduce logistics and transportation costs and supply chain risks after completion and operation. On the product side, the company has deployed innovative products such as electric hidden air vents and optoelectronic touch surfaces, etc., and the value of bicycles is expected to increase by more than 20%. According to the company's official website, at present, related products have received orders for business class models on the road.

In the first half of 2023, the company's cockpit components products achieved revenue of 1,861 billion yuan, +15.5% year-on-year; gross margin was 23.7%, +2.7pcts year-on-year.

The leading supplier of domestic communication piles, and the export of products to overseas is progressing smoothly. The company focuses on the development direction of new energy business. Existing products include intelligent charging piles, BDU, PDU, charging port high voltage wiring harnesses, etc. The company is one of the first domestic suppliers of intelligent charging stations for Volkswagen's MEB platform models, and has been targeted by high-quality customers such as Extreme Krypton and Zhiji. The company has also launched DC charging pile products, which can output up to 1000V DC voltage, which can meet fast charging requirements. In terms of charging piles going overseas, the company's products have obtained CSA American standard charging pile UL certification and TUV European standard charging pile CE certification. Currently, the company is actively promoting the construction of overseas sales channels, key customer development, and digital marketing platforms. In the first half of 2023, the company's new energy business achieved revenue of 355 million yuan, +76.3% over the same period last year. By the end of 2022, the total order value for the entire life cycle of the company's new energy business was about 14.5 billion yuan, and there were plenty of orders in hand. As subsequent projects continue to be mass-produced and delivered, we expect this business to continue to grow rapidly.

Risk factors: risk of declining sales volume in the automotive industry; NEV penetration rate falling short of expectations; risk of company technology and product iteration falling short of expectations; risk of impairment of goodwill; risk of impairment of goodwill; risk of management and integration; and progress of convertible bond issuance projects falling short of expectations.

Investment suggestions: The company's automobile cockpit components continue to break through new energy customers. It has won the bid for the luxury accessories project of the world's leading new energy OEMs, and has broken through the support of new leading car builders such as NIO and Ideal. The company's new energy business revenue is growing rapidly, the product matrix continues to be rich, and the customers are of high quality. Considering changes in the fair value of the company's financial assets due to performance promises, which in turn causes non-recurring losses, we believe that the deduction of non-return net profit can better reflect the company's profit level. Considering the increase in profits brought about by the acquisition of 12% of Joyseng Qunying's shares, we raised the company's net profit forecast for 2023/24/25 to 220 million/285 million/354 million yuan (original forecast was 213 million/272 million/335 million yuan), and the corresponding post-deduction EPS forecast was 1.67/2.16/2.68 million yuan. According to the unanimous expectations of Xinrui Technology, Inbol, and Wind of Huguang Co., Ltd., its average PE value in 2023 was about 141 times. Considering that the 2023-2025 net profit growth rate of Xinrui Technology, Yingboer, and Huguang Co., Ltd. is unanimously expected to be 66%/73%/205%, respectively, while the company's automotive smart cockpit components and scales business has formed a large business scale, we expect the company's non-owned net profit growth rate to reach 27% in 2023-2025, which is lower than the comparable companies mentioned above. Therefore, we conservatively gave the company a net profit of 25 times PE deducted from the parent in 2023, corresponding to the target price of 42 yuan (the original target price was 37 yuan), maintaining the “buy” rating.