23Q3 revenue was $744 million, same increase of 12.8%, net profit of $81 million, same increase of 0.5%. The company's 23Q1-3 revenue was $1,941 million, up 38.6%. 23Q1/Q2/Q3 revenue and year-on-year growth rate were 464 million (yoy +79.0%) /732 million (yoy +52.1%) /744 million (yoy +12.8%), respectively.
The net profit of 23Q1-3 was 174 million yuan, an increase of 31.7%. The net profit and year-on-year growth rate of 23Q1/Q2/Q3 were 28 million (yoy +629.6%) /64 million (yoy +35.7%) /81 million (yoy +0.5%), respectively.
23Q1-3 gross profit margin of 21.6%, same increase of 1.9pct, net profit margin of 10.6%, same increase of 0.5pct23q1-3 sales expense ratio of 1.1%, same increase of 0.02pct. The increase in sales expenses was mainly due to the increase in sales expenses of the holding subsidiary Hongxing Auto Leather; management expense ratio of 3.4%, same decrease of 0.4pct; R&D expenses ratio of 2.4%, same decrease of 0.1 pct; financial expense ratio of 0.5%, same increase of 0.4 pct. Financial expenses increased mainly due to increased exchange losses. In addition, the 23Q3 company's net cash flow from operating activities was 5.56 million yuan, a decrease of 88.5%, mainly due to increased remuneration paid to employees.
Hongxing Auto Interior's revenue is growing rapidly. The company's holding subsidiary Hongxing Auto Leather, a holding subsidiary of the company, is currently the ideal interior leather supplier for many car brands such as Auto, NIO Auto, Wenjie Auto, Geely Auto, Mazda Auto, etc., and has obtained targeted supply of various new energy models such as the ideal L7, L8, L9, NIO ET7, ES6, EC6, and Wenjie M5. Benefiting from the rapid development of the domestic NEV market, and the rapid increase in sales volume of automobile leather products sold by subsidiary Hongxing Auto Leather The volume increased significantly over the same period last year, so Revenue from automotive interior leather has grown rapidly. Furthermore, after the merger and acquisition of Hongxing Auto Leather, the company helped Hongxing Auto Leather have sufficient raw material reserves, expanded production capacity, and ensured quality and stable product delivery through production capacity collaboration. At the same time, it also helped Hongxing Auto Leather improve management efficiency, reduce costs and increase efficiency through management experience sharing. As a result, the profitability of 23H1 Hongxing Auto Leather improved markedly compared to the same period in '22.
Hongxing Auto Leather has been well received by customers based on the stability of product quality, timeliness of supply, and customer service response, etc., and has established a solid foundation of cooperation with customers. For existing customers, while serving the original fixed models, we are also actively seeking fixed points for new models.
The company selects and equips advanced production equipment worldwide
Over the years, the company has introduced intelligently controlled dyeing drums, automatic drum feeding systems, automatic drum feeding and feeding systems, fully automatic computer peeling machines, high-precision shearing machines, constant pressure water control systems, computer sprayers, fully automatic computer cutting machines, laboratory testing analyzers, and advanced sewage treatment equipment from Italy, France, South Korea, Brazil and other countries. In addition, the company has actively participated in the development of intelligent AI blue skin grade testing machines, AGV unmanned transport cars, automatic transmission lines, and rolling machines. Currently, these automated transformation systems or equipment have all been used in production, not only to improve the company, but also to improve the company. The degree of automated manufacturing also provides hardware guarantees for the stability of product quality. Currently, the company is exploring the intelligent and automated transformation of tannery equipment through joint research and development with third party organizations. In the future, as more intelligent and automated equipment is put into use, the company's production efficiency and quality control will reach a new level.
Maintain profit forecasts and maintain “buy” ratings
The company is mainly engaged in R&D, production and sales of natural cow leather. The main products are leather for uppers, leather for automotive interiors, leather for bags, leather for furniture, and special functional leather. In the field of leather for uppers and leather for bags, the company's products are positioned in the middle and high-end, mainly to meet the needs of well-known domestic and foreign brands. We expect the company's net profit from 23-25 to be 227/3.18/439 million yuan respectively, EPS is 0.78/1.09/1.50 yuan/share, and corresponding PE is 16/12/8x, respectively.
Risk warning: risk of environmental policy; risk of product innovation and technological progress; risk of price fluctuations of major raw materials; exchange rate risk; risk of reduced use of natural leather in upper leather due to changes in fashion trends, etc.