Matters:

On January 26, 2024, the company announced its 2023 annual performance forecast: net profit of 1400-18 million yuan (YOY -75.77% to -68.85%) in 2023, with a median value of 16 million yuan (YOY -72.31%); deducted non-net profit of 887 to 12.87 million yuan (YOY -85.37% to -78.77%), with a median value of 10.87 million yuan (YOY -82.07%).

Single Q4 is expected to achieve net profit of 68.88 to 3,312,000 yuan (YOY -106.34% ~ -69.52%), median value of 1,312,000 yuan (YOY -87.93%); deducted non-net profit of 126.59~2,7341 million yuan (YOY -111.95% ~ -74.19%), with a median value of 7341,000 yuan (YOY -93.07%). Among them, in the fourth quarter of 2023, a total of 8.4279 million yuan was accrued in asset impairment losses (the scope includes accounts receivable, inventory, fixed assets, projects under construction, intangible assets, goodwill, etc.).

Commentary:

Multiple expenses impacted 23-year results. The revenue side company achieved operating income of 590 million yuan (YOY +0.52%) in the first three quarters of 2023, while the profit side was under pressure for 23 years, with a median net profit of 16 million yuan (YOY -72.31%) according to the performance forecast, mainly due to: (1) The company conducted impairment tests on accounts receivable, inventory, intangible assets and goodwill, and the total impairment of individual assets and goodwill is estimated to be about 9.32 million yuan. (2) Early preparations for the company's business expansion led to an increase in management costs such as plant leasing, etc., and an increase in intermediary service fees due to matters such as overseas investment and acquisition projects; (3) Interest expenses on existing convertible bonds in 2023 were high, and exchange gains and losses decreased compared to the same period last year, which led to an increase in financial expenses.

The stamping mold+stamping parts two-wheel drive company has entered the fast track of development. (1) Stamping dies are an indispensable key tool in vehicle manufacturing. In recent years, with the rapid penetration of new energy vehicles, the iteration of new models has accelerated, driving the continuous expansion of the market capacity of stamping dies. Among them, overseas car companies lag behind China in the electrification process, and subsequent development will accelerate, driving the overseas mold market to accelerate. In the field of automotive molds, the company cooperated deeply with overseas customers such as Magna, Lear, and Brose, while actively increasing production capacity in the US and Germany to meet rapidly growing overseas demand. In the context of the rapid development of the overseas mold industry and the expansion of the company's production capacity, the company's automotive mold business is expected to fully benefit from this overseas model cycle. (2) Stamping parts are widely used in automobiles, and the supporting value of bicycles can reach the level of 10,000 yuan. Based on 10,000 yuan per bicycle, the global automotive stamping parts market space in 2022 is 816.3 billion yuan. The company has been deeply involved in the field of automotive stamping parts for more than ten years, and has manufacturing, R&D, product and customer advantages. Tesla is the world's leading NEV company, and the company's deep cooperation with Tesla is expected to follow the rapid development of customers. The company announced in December 2023 that the fixed increase has been successfully completed. With the production capacity of 35 million new sets of stamping parts being implemented, the company's stamping parts are expected to enter a period of rapid growth.

Profit forecasting and investment advice. After more than ten years of intensive cultivation, the company has formed two major segments: stamping dies and stamping parts. Stamping molds benefit from overseas model cycles, and stamping parts are bound by major customers to actively expand production. Based on the 23-year performance forecast, we adjusted the 2023-2025 net profit forecast to RMB0.16/1.6/260 million (original value: RMB0.18/1.6/260 million). Referring to the valuations of comparable companies such as Ruihu Mold, Tuopu Group, and Xinquan Co., Ltd., considering the high growth of the company's mold & stamping parts business, the company was given a PE valuation of 27 times in 24 years, corresponding to a target price of 24.3 yuan, maintaining a “strong promotion” rating.

Risk warning: Downstream demand falls short of expectations, production expansion falls short of expectations, competitive landscape intensifies, dependence on a single major customer is high, and the gross margin of the mold business falls short of expectations.