The company achieved revenue of 6.197 billion yuan in 2023Q3, +5.8% year-on-year, +11.2%; net profit of 327 million yuan, -25.7% year-on-year and +4.6% month-on-month. The performance was in line with market expectations. The company is a global high-quality supplier of automotive interiors and metal parts. It continues to develop lightweight and electronic products, and has successfully expanded new energy customers such as T-car manufacturers, BYD, and NIO. The product and customer structure are optimized, and profit growth space is expected to be fully opened. We maintain the company's 2023/24/25 EPS forecast of 1.48/1.73/2.04 yuan, referring to the industry's average level of PEG=1, combined with the company's performance CAGR forecast for the next three years. We gave the company a valuation of 13xPE in 2023 to maintain the target price 19 yuan, maintaining the “buy” rating.

The 3Q23 performance was in line with market expectations, and operations continued to recover month-on-month. The company announced that in the first three quarters of 2023, it achieved revenue of 16.407 billion yuan, +16.7% year-on-year; net profit of the mother was 839 million yuan, +6.0% year-on-year. Among them, 2023Q3 achieved revenue of 6.197 billion yuan, +5.8% year-on-year, +11.2%; net profit of 327 million yuan, -25.7% year-on-year, and +4.6% month-on-month. The performance was in line with market expectations. According to Marklines data, the company's core customer, Volkswagen Group, sold 2.159,000 vehicles in 3Q23, +1.6%, -0.1%; Toyota Group's 3Q23 sold 2,521 million vehicles, +1.6% year on year, -0.8%; affected by the US auto strike, GM Group sold 1,270 million vehicles in 3Q23, -22.4% year on year and -17.6% month on month. Downstream customer sales were under pressure. The company's performance bucked the trend, showing strong business resilience. We believe that with the improvement in sales volume of downstream customers and the reduction of losses in overseas business, the company is expected to achieve a second growth curve in performance in the future through continuous expansion of business scope and diversification of product structures.

3Q23 Gross margin continued to improve, and business conditions remained steady. In 3Q23, the company's gross margin was 17.8%, -2.3 pcts year on year and +1.7 pcts month on month. The company's gross margin continued to improve month-on-month. We believe this is mainly due to the company's rising production capacity for new projects and improvements in product structure. The 3Q23 company's expense rate was 11.3%, +3.0pcts, +2.3pcts month-on-month, of which the sales expense rate was 1.8%, the same year-on-year, +0.6pct; the management expense rate was 5.8%, +2.1pcts, and +1.4pcts month-on-month. We believe that this is mainly due to the increase in overseas projects; the R&D expense rate is 3.5%, +0.3 pct, and -0.1 pct; the financial cost rate is 0.1%, +0.6pct, +pc0.5t month-on-month. We believe that with the decline in prices of major raw materials such as ABS, polypropylene, and nylon, combined with the gradual release of overseas production capacity and the acceleration of global integration, the company's gross margin and operating level are expected to continue to improve.

With the double optimization of the product customer structure, profit growth space is expected to be fully opened up. The company is deeply tied to FAW-Volkswagen and quickly expanded customers to high-end traditional automobile brands such as FAW Group, Toyota, BMW, Mercedes-Benz, and Jaguar Land Rover through joint venture brand credit endorsements. The company is actively adjusting its customer structure and boosting the NEV circuit. Currently, it has successfully entered the supply chains of T Depot, BYD, NIO, Xiaopeng, etc., and has fully opened up room for future growth. The company focuses on developing lightweight and intelligent products, cooperates with Shanghai Yirui to carry out R&D projects in smart cockpits, etc., completed the acquisition of the CMS electronic rearview mirror business in early 2023, and has the first CMS management and development team in China. The company's 2022Q3 became a platform batch supplier for new energy high-strength steel battery case products for a leading international OEMs. The company expects the maximum total life cycle amount to about 8.1 billion yuan. Furthermore, the company's new orders are developing smoothly. According to the company's previous report, 2023H1 received a new order amount of 5.158 billion yuan Yuan (according to HIS data in 2023), the completion rate was 196% compared to the budget target, an increase of 31.38% over the same period last year. Among them, orders for new energy pure electric models accounted for 58%, and the growth momentum was strong.

The production capacity layout is perfect, and global optimization is progressing steadily. The company has basically completed the global layout of production bases. Domestically, the company already has many production bases such as Ningbo, Shanghai Lingang, Changchun, Shenyang, Chengdu, Tianjin, Foshan, Qingdao, Chongqing, Changsha, Wuhan, Nanjing and Hefei. On the foreign side, the company has also established multiple production bases in Europe (Germany, Romania), North America (Mexico, the United States, Canada), and Southeast Asia (Indonesia, Vietnam, and the Philippines). In the future, it is expected that a large-scale effect will be formed through plant layout, forming an efficient supporting network, and continuously optimizing the company's operating efficiency. According to the company's 2023 mid-year report, the company's 2023H1 North American business (US, Mexico, Canada) achieved business revenue of 814 million yuan, +16.2% year-on-year, and net profit of -44.3 million yuan, a loss of 88.94 million yuan over the same period last year; the European side (Germany, Romania) revenue was +49.3%, and losses increased to 64.71 million yuan, mainly due to mass production of many new projects, unstable quality during the climbing period. We believe that the integration effect of the company's North American business is obvious, and it is expected that it will become the focus of loss reduction in the future; the European business is expected to continue to optimize operating efficiency and open up room for performance growth along with the rise in production capacity of new projects.

Risk factors: global automobile sales fall short of expectations; the company's overseas business restructuring falls short of expectations; product development progress falls short of expectations; expansion of new products and new customers falls short of expectations; large fluctuations in raw material prices; and geopolitical risks.

Profit forecast, valuation and rating: The company is a global high-quality supplier of automotive interiors and metal parts. It continues to develop lightweight and electronic products, and has successfully expanded new energy customers such as T-car manufacturers, BYD, and NIO. The product and customer structure are optimized, and profit growth space is expected to be fully opened. We maintain the company's 2023/24/25 EPS forecast of 1.48/1.73/2.04 yuan, referring to the industry's average level of PEG=1, combined with the company's performance CAGR forecast for the next three years, which is 11.4%, we gave the company 2023 13xPE valuation, maintaining the target price of 19 yuan, maintaining the “buy” rating.