Benefiting from the centralized release of new opportunities, 3Q23 revenue increased significantly over the same period and month over month. In 3Q23, the company achieved revenue of 1.68 billion yuan (YoY +86%, QoQ +54%) and net profit of 110 million yuan (YoY +87%, QoQ +27%).

The high year-on-year increase in performance was mainly due to the high popularity of the Huawei Mate 60 series in the market. The “catfish effect” led other Android mobile phone brands to actively prepare goods. The company's main customers, such as Honor, Xiaomi, and Huawei, continued to grow in order volume. The capacity utilization rate at all bases was at a high level, compounded by the rapid expansion of the automobile business. In terms of profitability, the slight decline in gross margin in the third quarter was mainly due to an increase in the share of purchases. The 3Q23 gross profit margin was 17.5% (YoY -1.9pct, QoQ -1pct).

The company is a supplier to Huawei, and the automotive electronics business is growing rapidly. The company has successfully entered the supply chain system of the top ten auto parts suppliers in the world, such as Valeo, Continental Electronics, and Nippon Denso. It is also one of the core suppliers of Huawei Auto. It provides customers with automotive electronic components such as various sensors, car driving data recording systems, smart cockpit hardware, and power management systems. The products have been widely used in well-known Chinese and foreign automobile brands such as BMW, Audi, Volkswagen, Tesla, Nissan, and Geely. The business scale of the company's existing automotive electronics customers continues to increase, while continuing to introduce incremental customers. It is expected that the company's automotive electronics business is expected to grow exponentially in the next few years, becoming the company's new revenue pillar.

India has released scarce production capacity, and mobile phone orders are plentiful. 3Q23 Due to the continuous increase in orders and the production line at full capacity, the company began large-scale talent recruitment. The company produced about 65 million units in 2021. With the increase in production capacity at the Phase III and Phase IV bases, peak production capacity increased by CAGR of 25%-30%. This year, the Indian factory also achieved a significant increase in production capacity, and the Vietnam base is also stepping up expansion. As of September 2023, the company's global manufacturing base can provide customers with the manufacturing capacity of more than 120 million smartphones or similar electronic terminals every year.

Investment advice: Maintain a “buy” rating.

Net profit is estimated at 4.2/5.1/640 million yuan from 2023-2025, with a year-on-year growth rate of 38/23/ 24%; diluted EPS = 0.54/0.66/0.82 yuan; the current stock price corresponds to PE = 48/40/32x. We are optimistic that the company's mobile phone business will benefit from the recovery of the Android industry chain. At the same time, the automobile business will expand rapidly, accelerate the introduction of new customers and projects, and maintain the “buy” rating.

Risk warning: Consumer electronics recovery falls short of expectations; automotive electronics growth falls short of expectations.