Key points of investment
Event: The company released its report for the third quarter of 2023. In the first three quarters of 23 years, the company achieved revenue of 422 million yuan, +19.34% year-on-year, of which Q3 achieved revenue of 150 million yuan, -1.80% year-on-year; in the first three quarters, the company's net profit for the first three quarters was 1.35/128 million yuan, +20.11%/+25.69% year-on-year, respectively. Q3 The company achieved a gross profit margin of 51.25%, -0.87/-3.06 pct compared with the same period last month. The company's Q3 profit level has been affected to a certain extent by increased competition in the industry, stronger demand for cost control, and changes in product structure.
1. Sword refers to overseas markets, and overseas business has entered a period of volume
The European and Mexican subsidiaries have deployed production capacity for products such as hydraulic lifters, roller rockers, and high-pressure pump lifters. They have now been completed and put into production and are entering the release period. At present, the company has received project targets from VW Europe, VW Mexico, VW Brazil, Deutz, MAN, etc., and has achieved mass production and supply one after another. Expanding overseas business creates new growth points for the company, which is expected to drive continued growth in valve transmission business revenue.
2. Continued expansion of categories is expected to contribute to increased performance
The company actively explores the application of precision components in automotive transmissions, body stabilization systems, precision solenoid valves, air conditioning thermal management systems, and new energy vehicles. Currently, it has successfully supplied transmission parts for Changan Ford and body stabilization system components for BYD. The company has made some progress in customer development for high-pressure pump column products. Currently, it has obtained fixed-point supply qualifications for Shanghai VW, BAIC, Liuzhou Wuling, BYD, Stellantis, and GM in North America. At the same time, the company is actively developing supporting business for new energy vehicles, extending it to fields such as carbon dioxide heat pump systems, integrated thermal management modules, hollow motor shafts, and power battery system housings. The company has been deeply involved in the field of cold forging for many years and has mature technology. The superimposed cold forging process has the advantages of cost reduction and efficiency, and the company's new business expansion is expected to bring a considerable increase in performance.
Investment Strategy:
The company is expected to achieve revenue of 6.11/7.53/883 million yuan in 23/24/25, net profit of 1.94/2.34/276 million yuan, EPS of 1.44/1.73/2.04 yuan/share, and the current stock price corresponding to PE is 16/13/11 times. For the first time coverage, a “buy” rating is given.
Risk warning:
Overseas business development falls short of expectations; progress in new business falls short of expectations; fluctuations in raw material prices affect profit levels, etc.