Core views
In 2023 Q3, the company achieved revenue, net profit and net profit after deducting non-return net profit of 452 million yuan, 225 million yuan, and 225 million yuan respectively, year-on-year differences of +52.66%, -7.80%, and -0.10%, and +14.43%, -19.35%, and -7.41% month-on-month respectively. Q3 Revenue growth is due to the continuous implementation of new projects, and the volume of new projects such as Geely and Chery drives revenue growth. The company is a dual leader in the independent EGR and motor core business, and there are plenty of orders in hand for various businesses. The EGR business has benefited from the recovery of commercial vehicles and the accelerated penetration of hybrid vehicles, and the successive implementation of new production capacity in the motor core business is conducive to the release of existing orders. It is estimated that the company's net profit from 2023-2024 will be 150 to 230 million yuan, corresponding to the current stock price PE of 34 and 22X.
occurrences
The company disclosed its three-quarter report for 2023. Q3 in 2022, it achieved operating income of 452 million yuan, an increase of 52.66% over the previous year, net profit of 225 million yuan, a decrease of 7.80% over the previous year, and net profit of 225 million yuan after deducting net profit from non-return to the mother, a decrease of 0.10% over the previous year.
Brief review
Q3 revenue increased 14.43% month-on-month, and the release of new projects led to increased performance. In Q3 of 2023, the company achieved revenue, net profit, and net profit of 4.52, 0.25 billion yuan after deducting non-return net profit of 4.52, 0.25 million yuan, year-on-year, +52.66%, -7.80%, and -0.10%, respectively, and +14.43%, -19.35%, and -7.41% over the previous year. Revenue was under pressure due to declining commercial vehicle prosperity and declining sales from core customers, but thanks to the continuous implementation of new projects, Q3 revenue increased month-on-month. Q3 commercial vehicle sales volume was 968,000 units, -6.29% month-on-month; core customer Tesla Q3 sold 222,500 units, -9.95% year-on-month; however, the volume of new projects such as Geely and Chery led to revenue growth.
The profit side of Q3 declined month-on-month because the raw material subsidy of 100 million dollars was not confirmed. Profit increased month-on-month after confirmation.
Gross margin is being pressured in stages, and R&D investment is driving up costs. Q3 The company's gross profit margin and net profit margin were 16.74% and 5.56% respectively, -2.35 and -3.64pct, respectively, and -0.60 and -2.42pct over the previous year. Q3 The decline in gross margin is mainly due to the fact that the company's core production capacity continues to rise, leading to high pressure on the cost side. The cost rate for the Q3 period was 10.40%, +0.60 and +2.05pct, respectively. Among them, the sales expense ratio, management expense ratio, R&D expense rate, and financial expense ratio were 1.10%, 3.56%, 4.36%, and 1.26%, respectively, and +0.17, -0.02, +1.21, and +0.40pct, respectively.
Customers continue to expand, and operations are actively improving. (1) In terms of EGR, passenger car EGR mainly supports BYD, Geely, Chery, Guangzhou Automobile, etc., and new customers and projects are gradually mass-produced; non-road customers have continued to increase since the T4 standard was implemented at the end of 2022; (2) In terms of precision parts, it actively undertakes new energy projects such as electric drives/electronic control/thermal management in products such as door locks/seats/seat belt systems to optimize the product structure; (3) In terms of new energy business, the customer structure and product system of the motor core business sector have been further improved, adding Fredi Power, Star Drive, and Jin Kang Power Waiting for multiple customers Project targeting. (4) The natural gas injection rail assembly project affected its sales volume last year due to fluctuations in natural gas prices and a decline in production and sales of heavy truck commercial vehicles. The first half of this year was targeted by new end customers, which is expected to have a positive impact on annual revenue.
Investment advice
The company is a dual leader in the independent EGR and motor core business, and there are plenty of orders in hand for various businesses. The EGR business has benefited from the recovery of commercial vehicles and the accelerated penetration of hybrid vehicles, and the successive implementation of new production capacity in the motor core business is conducive to the release of existing orders. The company's net profit from 2023-2024 is estimated to return 150 million yuan to 230 million yuan, corresponding to the current stock price PE of 34 and 22X.
Risk analysis
1. The prosperity of the industry fell short of expectations. Stimulated by steady growth policies such as automobile purchase tax cuts in the second half of 2022, the industry is booming. Under expectations of a decline in policy support in 2023, future industry conditions may fluctuate.
2. The competitive landscape of the industry has deteriorated. Domestic and foreign parts suppliers compete for layout. As supply factors such as technological progress and new production capacity change, industry competition may intensify in the future, and the company's market share and profitability may fluctuate.
3. The progress of customer development and mass production of new projects fell short of expectations. The company is accelerating the expansion of new customers. Considering the fluctuation in the pace of development of new model projects by car companies, there may be fluctuations in the fixed project cycle within a specific period of time; in addition, the company's new production capacity construction may be affected by uncontrollable factors, causing mass production progress to fall short of expectations.