The active removal of warehouses by customers led to a decline in Q3 revenue. Losses in the NEV business dragged down 2023Q1-3 revenue of 580 million yuan (-2.4%), net profit of 0.4 billion yuan (-49.6%), net profit of 0.4 billion yuan (-28.6%), and deducted non-return net profit of 0.4 billion yuan (-28.6%). Looking at 2023Q3 in a single quarter, 2023Q3 revenue was 170 million yuan (-18.9%), net profit was 0.2 billion yuan (-95.0%), and net profit from non-return mothers was 0.1 billion yuan (-95.7%). The decline in revenue is mainly due to domestic customers being affected by the real estate-related industry chain, while overseas customers are affected by active inventory and supply chain adjustments.

The decline in profit was greater than revenue, mainly due to losses in the NEV business and the increase in the share of small household appliances and auto parts businesses. Considering the impact of customer dewarehousing, we lowered our profit forecast for 2023-2025. It is estimated that the company's net profit for 2023-2025 will be 0.4/0.5/0.6 billion yuan (original value 0.8/1.0/1.2 billion yuan in 2023-2025), corresponding to EPS, 0.19/0.21/0.25 yuan, and the current stock price corresponding to PE is 63.7/55.9/46.6 times. The company's export market expansion is compounded by the steady expansion of the new energy vehicle air filter business, keeping the “buy” rating unchanged.

Under the influence of the business structure, gross margin declined. Due to the decline in revenue, the expense ratio increased 2023Q1-3 by 24.2% (-1.7pct), and the period expense ratio was 15.6% (+0.4pct). Among them, the sales/management/development/development/finance expense ratio was 3.9%/9.0%/2.5%/+0.3%, respectively, -1.3pct/+0.4pct/+0.6pct/+0.7pct. Under the combined influence, the net interest rate was 7.5% (-7.0pcts), and the net interest rate after deducting the non-net interest rate was 6.6% (-2.4pcts). Looking at 2023Q3 in a single quarter, the gross profit margin was 21.0% (-5.6pcts), and the period expense ratio was 19.3% (+1.9pcts). Among them, the sales/management/development/development/finance expense ratio was 4.1%/10.9%/3.3%/1.0%, respectively, and -3.2pct/+2.0pct/+1.2pct/+1.9pct. The increase in R&D cost rates is mainly due to a surge in R&D at the trial production stage of new products. Under the comprehensive influence, the 2023Q3 net profit margin was 1.1% (-17.2pcts), and the net profit margin was 0.4% (-7.2pcts) after deducting non-net interest. The main investment income declined. 2022Q3 obtained revenue from the sale of assets of 024 million yuan, the unsold assets of 2023Q3, and the year-on-year decline in government subsidies in 2023Q3.

2023Q1-3 The cash flow situation is good, operating capacity has improved 2023Q1-3 The net cash flow from operating activities is 0.9 billion yuan (+20.9%). The cash flow situation is good. The inventory turnover days for 2023Q1-3 are 94.3 days (-8.9 days), and the number of accounts receivable turnover days is 86.2 days (-5.6 days). Inventory at the end of 2023Q3 was 130 million yuan, -5.0% at the end of 2023Q2 and -12.3% over the same period. Operational capacity has improved.

Risk warning: industry cycle changes; market competition intensifies; new energy vehicle business expansion falls short of expectations.