Incident: The company released its 2023 annual report. The company achieved total operating revenue of 4.01 billion yuan, +27.7% year-on-year, and realized net profit of 340 million yuan, +92.0% year-on-year, and realized deduction of non-net profit of 380 million yuan, or +79.9% year-on-year.

Looking at a single quarter, Q4 achieved revenue of 1.06 billion yuan, +33.4% year-on-month, +16.5% month-on-month, net profit of 80 million yuan, +90.6% year-on-year, -19.1% month-on-month, after deducting non-net profit of 80 million yuan, +109.8% year-on-year, and -21.3% month-on-month.

Benefiting from the recovery of the heavy truck industry, the volume and price of crankshafts and connecting rods have risen sharply. The company's crankshaft and connecting rod products are supplied to many domestic and foreign OEMs, and are sold to more than 20 countries and regions along with the main engine. The engine support rate for mainstream domestic commercial vehicles is as high as 95%. In 2023, the heavy truck industry sold 911,000 units, +35.6% year over year. The company's crankshaft and connecting rod products fully benefited from the recovery of the heavy truck industry and achieved a sharp rise in volume and price. Sales volume: crankshaft sales reached 1.694 million units, +5.9% year over year, and sales volume of connecting rods reached 5.11,000 units, +17.6% year over year; unit price: the unit price of crankshafts was 1446.6 yuan/piece, +5.5% (note: engine crankshafts represent the “engine crankshaft” disclosed in the annual report and ship-grade crankshafts”).

The second growth curve can be expected in the future by concentrating on the layout of the suspended business. In 2023, the air suspension business achieved revenue of 270 million yuan, which was an important driving force for the company's performance growth, accounting for 6.8% of the company's revenue. In addition, the company continues to increase the layout of the air suspension business. In 2023, it will invest in a new 10-13T semi-trailer air suspension (with bridge) assembly line and a new surface coating production line. In 2024, the company plans to invest in the construction of a semi-trailer axle production line, a passenger car air spring production line, a passenger car CDC shock absorber and CDC solenoid valve assembly line. The company is concentrating on the development of the air suspension business. Subsequent air suspension is expected to contribute more performance to the company as the second growth curve.

Actively develop new products and customers to ensure the sustainable development of the company. In 2023, the company completed the development of 82 new crankshafts, connecting rods, castings and forgings from OEMs such as Cummins and Weichai; completed the development of 6 casting blanks such as case brakes, guide wheel seats, lower body, piston skirts, etc.; completed the signing of 29 export projects such as automation equipment, equipment automation transformation and upgrading, and complete line automation design turnkey solutions, including 14 equipment transformation and automation integration projects and 15 remanufacturing robots; completed a total of 38 castings for Linde, Weichai Hydraulics, Xiuye, Carter, Bonphilly, Dana and other customers New products Development; 12 models including eight airbags, four airbag air suspension assemblies, and CDC shock absorber systems for the heavy truck sector, 4 air suspensions for semi-trailers, 4 air suspensions for light trucks, and 2 gas distribution valves and magnetorheological shock absorbers for the passenger car sector have been completed. A total of 22 new suspension products have been developed. On the customer side, in 2023, the company developed a total of 27 new customers, including Changfa Agricultural Products, Yuchai Co., Ltd., Shiyan Hongzhao, Hebei Huachai, and Shantui. The company's dual efforts on the product side and client side laid a solid foundation for the 2024 market layout.

Profit forecasting and investment advice. The company's 2024-2026 EPS is expected to be 0.48 yuan, 0.59 yuan, and 0.71 yuan respectively. The corresponding dynamic PE is 11 times, 9 times, and 7 times, respectively, maintaining the “buy” rating.

Risk warning: market competition risk, raw material price fluctuation risk, risk of downstream customer sales falling short of expectations, risk of policy adjustments, etc.