Benefiting from domestic industry recovery+internationalization, the company's revenue and net profit to mother both increased in '23. According to the annual report, the company achieved operating income of 4.06 billion yuan in 2023, +27.74% year-on-year, and realized net profit before and after deduction of 391/380 million yuan, or +91.96%/+79.87% year-on-year. The year-on-year increase in the company's revenue and net profit mainly benefited from factors such as the recovery in domestic demand and the acceleration of internationalization. According to statistics from the China Automobile Association, wholesale truck sales in China were +22.62% year-on-year in 2023, with heavy trucks/medium trucks/light trucks +35.63%/+11.84%/+18.10%, respectively.

Gross margin was +3.74pct year-on-year in '23, and the dividend ratio increased markedly. The company's gross profit margin in 2023 was 24.91%, +3.74pct year-on-year, mainly due to increased capacity utilization and improved efficiency after automated production line transformation. In terms of cost ratio, the company's sales/management/R&D/finance expenses in '23 were 2.06%, 4.71%, 6.79%, and -0.07%, year-on-year, respectively, -0.30, +0.04, +0.77, and +0.18pct, respectively. Among them, the increase in R&D expenses was mainly due to an increase in R&D activities for new technologies and materials such as suspension. According to the announcement of the company's 23-year profit distribution plan, it is proposed to distribute a cash dividend of 2.30 yuan (tax included) to all shareholders for every 10 shares. No bonus shares will be given, and the share capital will not be transferred from the capital reserve fund, accounting for 66.62% of the net profit attributable to the mother.

The main crankshaft & connecting rod business has benefited from industry recovery+internationalization, and emerging businesses have opened up room for growth. The company has developed into the largest manufacturer of crankshafts and expansion rods for commercial vehicles in China. According to the annual report, the company's heavy engine crankshaft market share is 60%, and the diesel light engine crankshaft market share is 42%. The company's main business continues to benefit from industry recovery and increased competitiveness and development in the direction of internationalization, and relies on manufacturing capacity to enter an empty and electric steering track, opening up room for growth.

Profit forecast and investment advice: The company is a domestic crankshaft & connecting rod leader. The traditional main business benefits from industry recovery+internationalization, and emerging businesses open up room for growth. The company's EPS is expected to be 0.47/0.56/0.67 yuan/share in 24-26, keeping the company's reasonable value of 8.93 yuan/share unchanged, and maintaining a “buy” rating of 19 times PE in 24 years.

Risk warning: Industry prosperity falls short of expectations; idle development falls short of expectations; industry competition intensifies.