Based on the company's recent announcement and the 2023 three-quarter report, our updated review of the company is as follows:
Benefiting from the trend of electrification, the company's intelligent equipment business is growing steadily: the company's business mainly consists of two major segments, namely the intelligent equipment business and the electric drive business. According to the company announcement (2023-10-23 Investor Relations Activity Schedule), in the first three quarters of 2023, the company's intelligent equipment business was 1,884 billion yuan, accounting for 80.4% of revenue, an increase of 36.35% over the previous year. In 2023, H1's revenue was 1,221 billion yuan, up 33.15% year over year.
2023Q3's revenue was 663 million yuan, up 43.23% year over year. The company's intelligent equipment business revolves around the development needs of the NEV industry, and continues to make efforts in the fields of powertrain (electric drive systems and hybrid systems) intelligent assembly lines, intelligent assembly lines for power batteries and batteries, and lightweight body intelligent connection equipment and production lines. By the end of September, the company had orders of 5.833 billion yuan, laying the foundation for the development of the company's business.
The profitability of the equipment business is expected to recover. The profitability of the equipment business declined in the first three quarters of 2023 due to factors such as the epidemic, the company's market, increased research and development efforts, and inventory impairment. The company's intelligent equipment projects are all non-standard products customized by customers, and the revenue cycle is long from order acceptance to final confirmation. Most of the project revenue confirmed in 2023 was implemented in 2022. The company invested more in employee health, work efficiency, work capacity, resource security, etc., and increased expenses, leading to a decline in gross margin. Meanwhile, 2023Q3 confirmed asset impairment losses of 79.679 million yuan, mainly stemming from an international project in the intelligent equipment business. We believe that the company's equipment business still has sufficient orders, that some of the above influencing factors will subside in 2024, and that with the continuous improvement of the company's management experience and capabilities, the revenue and profitability of the equipment business is expected to continue to recover.
The electric drive business customer structure is adjusted, and platformization is expected to drive business improvement: H1's electric drive business revenue in 2023 was 260 million yuan, a year-on-year decrease of 48.62%. According to the company announcement (2023-10-23 Investor Relations Activity Schedule), the electric drive business revenue for the first three quarters of 2023 was 459 million yuan, accounting for 19.6% of revenue.
According to the 2023 semi-annual report, the company's main electric drive customers include NIO Auto, Dongfeng Honda, GAC Honda, Vietnam VINFAST, Geely, Dongfeng Motor, Zhixin Technology, JAC, and Chery Motors.
According to the company's announcement, the decline in the electric drive business is mainly due to the decline in sales of related models due to the adjustment of the company's largest customer's business strategy, and the new targeted projects in 2023 have not yet been expanded. The company is actively developing a new generation of high-performance motor electronic control products, and is also committed to achieving platformization at the component level of electric drive products. Platformization is conducive to releasing the large-scale effect of the electric drive business. The company adheres to the concept of “big customers, big projects, big products”. We believe that as new projects such as Chery Auto, Changan Auto, and Ideal Auto are targeted (see 2022 Annual Report and 2023 Semi-Annual Report), the company's platform-based products continue to advance, and the electric drive business is expected to improve.
Company profit forecast and valuation: In summary, the company's intelligent equipment business is expected to grow steadily, profitability will recover, and the electric drive business is expected to benefit from platformization and the improvement of new project volume management. We are optimistic about the company's medium- to long-term development trends. Considering the impact of the above factors in 2023, we adjusted the company's profit forecast for 2023-2025. Net profit attributable to mother was -1.01, 1.51 million yuan, and 235 million yuan, respectively, corresponding EPS was -0.73, 1.10, and 1.71 yuan, and PE was -38, 25, and 16 times, respectively. Maintain a “Recommended” rating.
Risk warning: Demand in the automotive industry is sluggish, the development of the NEV industry falls short of expectations, the rise in raw material prices exceeds expectations, the promotion of the company's intelligent equipment business falls short of expectations, and the promotion of the company's electric drive business falls short of expectations.