Chuanhuan Technology released its 23-year performance report and achieved steady growth. Chuanhuan Technology released its 2023 annual results report. In 2023, the company achieved operating income of 1,108 billion yuan, an increase of 22.25% over the same period last year, and achieved net profit attributable to shareholders of listed companies of 164 million yuan, an increase of 34.01% year on year. Net profit after deducting non-recurring profit and loss was 154 million yuan, up 34.65% year on year, and earnings per share were 0.76 yuan, up 35.71% year on year. The company achieved steady growth in performance in 2023. We believe that the main reasons are: (1) benefiting from the increase in demand in the NEV industry; (2) in the domestic NEV industry, on the basis of maintaining the company's rubber pipeline business, the company vigorously promoted the further application of rubber+nylon assembly pipelines, car body accessory piping business and homemade three-way links, joints, clamps and other products in OEMs. (3) The company continues to further optimize its products and customer structure to promote the company's profitability.

The company released a performance forecast for the first quarter of 2024, and the performance achieved a significant year-on-year increase. The company released a performance forecast for the first quarter of 2024. In 24Q1, net profit due to mother was about 40.6 million yuan to 48 million yuan, an increase of 80.29% to 113.15% year on year, and realized net profit after deduction of about 38.3 million yuan to 45.7 million yuan, an increase of 71.10% to 104.16% year on year, and the company's 24Q1 profit achieved a significant year-on-year increase. In the first quarter of 2024, the company's share of NEV revenue continued to increase. At the same time, the company continued to further optimize its product and customer structure to give full play to the business scale effect. The sales share of the top five major customers continued to increase, driving the company's profitability. We believe that the company is a high-quality integrated automotive pipeline supplier, and with the continuous optimization of products and customer structures, the company's performance is expected to continue to grow.

Actively lay out new markets such as energy storage pipelines, and open up a new growth curve. In recent years, while keeping its main business unchanged, the company has continued to explore new markets, such as pipeline markets in the fields of big data supercomputing and energy storage. As of the first half of 2023, the company's energy storage products have now established business negotiations or cooperative relationships with more than 40 energy storage customers, including G customers, B customers, and Q customers. Products in the energy storage field have been delivered in batches, and products in the field of big data supercomputing have also passed customer 1 certification. In the first quarter of 2024, the company's expanded liquid cooling piping system products used in energy storage and data center servers saw initial results. Liquid cooling piping systems in the energy storage field have already begun to be supplied in batches, and liquid cooling piping systems in the data center server sector have been delivered in small batches. Currently, these products are mainly imported from abroad. Chuanhuan is taking the lead in filling domestic gaps. We judge that the pipeline market space in emerging fields such as energy storage is broad. The company has a first-mover advantage and is expected to achieve rapid growth in supply volume and open up a new growth curve for the company.

Profit forecasting and investment advice. We expect the company's net profit to be 1,64/236/304 million yuan for 2023-2025, and EPS of 0.76/1.09/1.40 yuan respectively. Referring to the valuation levels of companies in the same industry, considering that products in the field of energy storage and other fields are expected to open up a new growth curve, we will give them 18-22 times PE in 2024, corresponding to a reasonable value range of 19.62-23.98 yuan, maintaining the “superior to the market” rating.

Risk warning. The boom in the automotive industry is declining; production and sales of new energy vehicles fall short of expectations; raw material prices fluctuate greatly; and the development progress of new products and new customers falls short of expectations.