The company released its three-quarter report for 2023. Revenue continued to grow at a high level, and performance was under pressure in the short term. During the reporting period, the company maintained rapid and steady development, with orders in hand reaching 2.8 billion yuan (as of 2023.10.30). The operation of the three major business segments improved, and increased internationalization further opened up room for growth, and we look forward to a subsequent recovery in business.

The main circuit for new energy is developing rapidly, and there are plenty of orders in hand. By business, 23Q1-3's automotive intelligent equipment achieved revenue of 532 million yuan, +65.37% year-on-year; charging and switching business was under short-term pressure and achieved revenue of 150 million yuan, -40.35% year-on-year; and intelligent battery manufacturing achieved revenue of 486 million yuan, +374.65% year-on-year. The company firmly focuses on the main business of new energy electrification and intelligent technology. As of 2023.10.30, the company had orders of 2.8 billion yuan, of which on-hand orders for battery/charging/automotive intelligent equipment were 10.69/10.55/ 665 billion yuan respectively. Abundant orders supported rapid revenue growth.

The increase in the share of battery equipment has put pressure on profits in the short term. 23Q3 achieved a gross profit margin of 12.62%, a year-on-year ratio of -17.7pcts, mainly due to the fact that battery equipment with lower gross margins in Q3 accounted for a relatively high share of revenue, while other sectors had relatively stable gross margins. 23Q3 sales/management/R&D expenses were +1.9pcts/+0.4pct/+2.5pcts year-on-year respectively. Mainly, the new business sector undertook new customers. Various costs and period expenses were higher, ultimately achieving a net profit margin of -5.7%, which turned into a year-on-year loss. With the optimization of the company's product structure and the strengthening of the profitability of the battery equipment business, an improvement in overall profitability can be expected in the future.

The customer development is smooth, and the international layout is increasing. The company's automotive equipment business covers eight of the world's top ten parts manufacturers. The battery equipment business has entered the Panasonic supply chain system, and the charging and switching business deeply covers customers in the entire industry chain, including battery manufacturers, energy providers, power exchange operators, and OEMs. In terms of overseas markets, the company is increasing its layout in the North American and Southeast Asian markets, and plans to expand investment in real estate capacity in Mexico, Canada, and Thailand. The share of overseas revenue is expected to continue to increase. The gross profit margin of 23H1's overseas business is 46.7%, which is significantly higher than domestic. As the company's overseas business layout deepens, overseas revenue & performance are expected to continue to rise.

The trend in the power exchange industry has not changed, and we expect a recovery in industry prosperity. The pace of development of the power exchange industry has slowed down in 2023, but the industry trend is very certain. The company has completed the development and product construction of passenger/commercial vehicle power exchange stations, station control cloud platforms, operation and maintenance terminals, and battery packs. In the first half of the year, the chassis power exchange station received orders from customers. Recently, the government's 1 trillion treasury bonds have been invested in infrastructure, which is expected to drive the growth of commercial vehicles and power exchange supporting facilities. Furthermore, the Ministry of Industry and Information Technology has officially announced standards for the heavy truck power exchange industry, which also provides a strong agent for industrial development. As a leading supplier of power exchange equipment, the company is expected to give priority to benefiting from the recovery in industry prosperity.

Risk factors: risk of developing new business markets; increasing competition in the power exchange industry; construction progress of power exchange stations falling short of expectations; risk of macroeconomic cyclical fluctuations; relevant countries/regional policies falling short of expectations; implementation of corporate fund-raising projects falling short of expectations.

Profit forecast, valuation and rating: The company's power exchange business layout is leading, battery and intelligent business is growing rapidly, customers continue to expand, and there is broad room for long-term growth. We adjusted the company's net profit forecast for 2023/24/25 to 0.46/0.82/128 million yuan (original forecast was 2.12/2.97/387 million yuan), and the current price corresponding to 2023/24/25 PE is 90/50/32 times, respectively. Considering that the pace of demand recovery in the power exchange industry is still uncertain, no target price will be given yet.