In 2023Q3, the company achieved revenue of 1,529 billion yuan, +10.5% year-on-year, +1.5%; net profit of 200 million yuan, +13.8% year-on-year, and +8.3% month-on-month. The performance was in line with market expectations. As a global leader in sunvisors, the company has successfully entered the roof product race track with its own technology and customer advantages. Compared with the value of bicycles with sun visors of 65 yuan, we expect the value of bicycles with integrated roof systems to exceed 500 US dollars, and there is full room for growth. We maintain the company's 2023/24/25 net profit forecast of 807 million/1,021 million/1,235 million yuan, giving the company a valuation of 25xPE for 2023, and the corresponding target price of 22 yuan, maintaining the “buy” rating.

The 3Q23 performance was in line with market expectations, and business growth remained steady. The company achieved revenue of 4.409 billion yuan in the first three quarters of 2023, +21.0% year-on-year; net profit of 539 million yuan, +10.9% year-on-year. Among them, 2023Q3 achieved revenue of 1,529 billion yuan, +10.5% year-on-month, +1.5%; net profit of 200 million yuan, +13.8% year-on-year, and +8.3% month-on-month. The performance was in line with market expectations. According to Marklines data, GM, the company's main downstream customer, achieved sales of 1,571,900 vehicles in 2023Q3, -4.0% year-on-year and +2.0% month-on-month. Ford achieved global sales of 1,040,000 vehicles in 2023Q3, +5.1% year-on-year, and -4.6% month-on-month. The company's performance significantly outperformed downstream customers, reflecting the company's business resilience. We believe that by taking advantage of the technology and customer advantages accumulated in the sun visor business, the company will expand new categories such as headrests and ceilings horizontally, and it is expected that future growth space will be fully opened up.

The gross margin was stable, moderate and positive, and the cost side was slightly under pressure. The gross margin of the 3Q23 company was 28.2%, +1.4pcts year-on-year, the same as the previous month. The cost rate for the 3Q23 period was 12.6%, +1.4pcts, +3.3 pcts month-on-month, of which the sales expense ratio was 2.6%, -0.1 pct, and -0.2 pct; the management fee rate was 7.0%, -0.6 pct, and -0.2 pct; the R&D expense rate was 4.1%, +0.9 pct, +0.3 pct month-on-month; the financial cost rate was -1.1%, +1.2pcts, +3.4pcts month-on-month, mainly due to exchange rate fluctuations.

We believe that as the North American business enters the mass production stage and downstream customer sales are recovering quarterly, the company's capacity utilization rate is expected to gradually pick up. Combined with the slowdown in the domestic automobile price war trend and the decline in commodity raw material prices, the company's gross margin level and operating conditions are expected to continue to improve.

The leader in the field of sun visors, and the global industrial layout is accelerating. The company is deeply involved in the automobile sun visor industry, and has obvious customer and product advantages. Since acquiring Motus, the second largest sun visor company in North America in 2018, the company has continuously optimized the customer structure of the sun visor business. Currently, it covers GM, Ford and Chrysler in the US, Volkswagen, Mercedes-Benz and BMW in Germany, as well as Toyota and Honda in the North American market. It has also established production bases in the US, France, Mexico, etc. In addition, on the production side, the company uses floor visors and ceiling central controllers at Motus's Mexican plant to produce, and continues to promote the construction of production bases and R&D centers in Shanghai, Zhejiang, the United States, France, Mexico, etc., and has set up overseas sales and service network companies in Japan, South Korea, Germany, the United Kingdom, Spain, the Czech Republic and other countries. At present, the company has established a global marketing and service network covering 18 countries, and the globalization process is progressing significantly.

The interior parts product matrix has expanded, and the ceiling business is gaining momentum. The company focuses on product innovation and technological upgrading, and focuses on the application of new materials and processes. Process technology such as mold manufacturing and foaming is mature. It has expanded product categories to automotive interior products such as headrests and ceiling central controllers, and the product matrix continues to expand. In July 2023, the company announced that it plans to issue 908 million yuan of convertible bonds for a period of 6 years for the construction of a base in the automotive interior parts industry in Mexico and the construction of 700,000 sets of ceiling products with an annual output of 700,000 sets. If this convertible bond issuance is successfully completed, the company will increase the production capacity of 300,000 sets of automotive roof system integration products and 1.3 million sets of automotive roof products, further optimizing and extending the NEV roof product structure, adding its deep support to the customer advantages of GM, Chrysler, Ideal, NIO, Xiaopeng and other well-known car companies in North America, and the growth space will be fully opened.

Risk factors: The prosperity of the automotive industry is declining; the company's product development progress falls short of expectations; the company's new products and new customer expansion fall short of expectations.

Profit forecast, valuation and rating: As the world leader in sun visors, the company has actively expanded similar products with its own technology and customer advantages, and successfully entered the roof product race track. Compared with the bicycle value of sun visors of 65 yuan, we expect the roof value to reach up to 500 US dollars, and there is full room for growth. The company is actively adjusting its customer structure, speeding up supporting customers such as Ideal, NIO, and Xiaopeng, and issuing convertible bonds, increasing plant construction in Mexico, and speeding up the global production capacity layout across the board. We maintain the company's 2023/24/25 net profit forecast of 807 million/1,021 million/1,235 million yuan, with reference to the company's performance CAGR forecast for the next three years as 24%. Combined with the average of PEG = 1 in the auto parts industry, we gave the company a valuation of 25xPE in 2023, with a corresponding target price of 22 yuan, maintaining the “buy” rating.